June 24, 2014 Newsletter

Dear Friends,

Tangents:

I will be writing the newsletter on Carolann’s behalf, as she is out of town.

Photos of the Day

Buyan, a male Siberian brown bear, is given a shower by a zoo employee on a hot day at the Royev Ruchey zoo in Russia’s Siberian city of Krasnoyarsk

Youth play soccer on the Arabian Sea shore in Mumbai, India. In a country where cricket dwarfs every other sport, the ongoing World Cup soccer tournament in Brazil has evoked a lot of interest in the game.

Market Closes for June 24^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

June 24 (Bloomberg) — Canada’s biggest pension fund is investing in Indian infrastructure assets after Prime Minister Narendra Modi vowed to build 100 new cities and revive growth in the $1.8 trillion economy.

Canada Pension Plan Investment Board said yesterday that it will pay $166 million for a stake in a unit of Larsen & Toubro Ltd., India’s largest engineering company. Investing in infrastructure will be core to the fund’s growth in the South Asian country, Andre Bourbonnais, senior vice president of private investments, said in an interview.

“Investors are confident of the long-term economic growth potential in India,” Ambareesh Baliga, managing partner of global wealth management at Mumbai-based Edelweiss Financial Services Ltd., said by phone. “Companies with proven track record and good balance sheets will get the maximum advantage. L&T is right there at the top.”

Modi has promised high-speed trains, low-cost airports that connect smaller towns and simple rules for industrial projects to help spur economic growth from near the slowest pace in a decade. Larsen & Toubro has surged 57 percent this year, the best performance on the S&P BSE Sensex index.

Canada Pension is committed to investing an equal amount for an additional stake in L&T Infrastructure Development Project Ltd. in 12 months after the initial purchase, according to a statement issued yesterday. L&T Infrastructure operates 19 toll roads, a power transmission line and a metro in Hyderabad. The L&T stake is Canada Pension’s first direct investment in India’s infrastructure and the latest push in its efforts to grow in the South Asian country. In February, the Toronto-based fund announced it had set up a $500 million fund with Piramal Enterprises Ltd., one of India’s top diversified companies, to finance home projects in the country.

In November, the pension fund contributed $200 million to an alliance with the Shapoorji Group to buy office buildings in major Indian cities. Bourbonnais said finding the right partners is key to Canada Pension’s expansion in India, which poses its unique challenges, including being “fairly bureaucratic.”

“In emerging markets, the selection of the partner is absolutely key,” he said.

Bourbonnais said the strongest electoral mandate for a government in 30 years will provide the political stability needed for additional investment. The partnership with L&T will allow Canada Pension to leverage this investment into new ones.

“We can use the joint venture to buy other toll road assets,” he said.

USA

June 24 (Bloomberg) — The Treasury sold $30 billion of two-year notes at the highest yield in more than three years as investors bet the economy will be strong enough for the Federal Reserve to remain on pace to raise interest rates next year.

The securities were sold at a yield of 0.511 percent, the most since the May 2011 monthly auction drew 0.56 percent. The auction’s bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, was 3.23, the lowest since March versus an average of 3.39 at the past 10 sales.

There is a 60 percent probability the Fed will raise rates to at least 0.5 percent by July of next year, based on fed funds futures, versus a 43.2 percent chance at the end of May. Following their June 17-18 policy meeting, Fed officials released forecasts, represented as dots on charts, showing that starting next year interest-rates would rise from zero faster than previously expected.

“We’ve had a decent concession of the last few days and yields at 50 basis points helped bring in some interest,” said Thomas Simons, a government-debt economist in New York at Jefferies Group LLC, one of 22 primary dealers that bid at Treasury auctions. “As we get closer to the Fed raising rates, we will drift higher.”

The yield on the current two-year note was little changed at 0.47 percent at 2:14 p.m. in New York, according to Bloomberg Bond Trader Prices. The yield on the benchmark 10-year note fell three basis points to 2.59 percent. Indirect bidders, an investor class that includes foreign central banks, purchased 23.1 percent of the notes, compared with an average of 26.2 percent for the past 10 sales.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 23.3 percent of the notes at the sale, compared with an average of 24.4 percent for the past 10 auctions.

Two-year notes have returned 0.3 percent this year, compared with a gain of 2.6 percent by the broad Treasuries market, according to Bank of America Merrill Lynch indexes. The two-year securities advanced 0.3 percent in 2013, while Treasuries fell 3.4 percent.

Fed policy makers said on June 18 that they expect their year-end rate will reach 1.13 percent in 2015 and 2.5 percent in 2016. Trading in the futures and swaps markets indicate the benchmark rate will remain below 2 percent through March 2017.

Today’s offering is the first of four auctions of coupon- bearing debt this week. The Treasury will sell $35 billion of five-year securities tomorrow and $29 billion of seven-year notes the next day. It will also auction $13 billion of two-year floating-rate notes tomorrow.

The sales, plus a $7 billion offering of 30-year Treasury Inflation Protected Securities on June 19, will raise $40.6 billion of new cash, as maturing securities held by the public total $73.4 billion, according to the U.S. Treasury.

Have a wonderful evening everyone.

Be magnificent!

As ever,

Brianna
“Along with Success comes a reputation for Wisdom” – Euripedes

Carolann Steinhoff, B.Sc., CFP®, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7