Five quick bulletins from the mortgage market: 1. Canada’s 5-year swap, which guides fixed mortgage rates, is on track for one of its biggest down days in history. Driving this carnage is the biggest oil rout since the 1991 Gulf War. JP Morgan says, “The oil and gas sector represents about 6% of [Canada’s] GDP but we expect the hit...
If you want to know what investors think of Canada’s economic prospects, this chart almost says it all: This sort of meltdown signals raw fear. Such moves are not usually reflective of just a little economic blip ahead, but a king-sized economic crisis. No hyperbole intended. What does it mean for rates? It means rate expectations are falling by the...
A lot of folks out there were skeptical that the big banks would show borrowers love and pass along the full Bank of Canada rate cut.Us included. But banks showed they still have a heart and did us right. RBC led the charge by slashing its prime rate 50 basis points to 3.45%. The rest of the bank herd then...
Amid a global growth scare, the BoC has slashed Canada’s most-watched rate for the first time in almost five years. “…The COVID-19 virus is a material negative shock to the Canadian and global outlooks,” the Bank said in its statement today. Despite how concerned the bank is about fuelling more debt, it chopped its overnight target by 50 bps to...
The rate market just witnessed a rarity. The U.S. Federal Reserve has suddenly slashed its key interest rate by 50 bps. The last such “emergency rate cut” happened in 2008 during one of the worst recessions of all time. This pretty much cements a Bank of Canada rate cut by tomorrow. “With markets now pricing in a full 25 bps...
The global viral crisis is proving incredibly fluid. Traders have suddenly and drastically altered their expectations of how the Bank of Canada will react to this exploding economic threat. At the time this is being written, the market is predicting a 68.3% likelihood of a BoC cut next week. It’s fully pricing in a cut by April 15. Source: Bloomberg...
Consider the state of our world: The yield curve is inverted (usually recessionary) Unemployment may be close to a cycle bottom (often recessionary) Oil prices are plunging (disinflationary) Consumers have too much debt and not enough savings(usually disinflationary) The market is desperate for yield (bullish for bonds / bearish for rates) Inflation is well-anchored (eliminating the need for rate hikes)...
The popularity of fixed mortgage rates in 2019 was unmistakable. But the Bank of Canada may have moved the needle for variable rates with its comments Wednesday. Below are the week’s top 10 statements from the BoC, all of which will be of interest to any serious rate watcher. The below quotes come from Bank of Canada Governor Stephen Poloz...
Canada’s rate-setter left its key rate untouched today while striking a less-than-cheery chord on the country’s outlook. Here’s a quick take on this morning’s Bank of Canada rate decision: Rate Announcement:No change Overnight rate: Remains at1.75% Prime Rate: Remains at 3.95% (seePrime Rate) Market Rate Forecast:One rate cut in 2020 BoC’s Headline Quote: “…Governing Council will be watching closely to...
Canada just witnessed its worst spike in unemployment since the Great Recession of 2009. An estimated 71,200 jobs were lost in November. And we all know what happens when unemployment bottoms and starts climbing. Rates usually drop. Is This Really the Bottom in Unemployment? No one knows what tomorrow will bring (until tomorrow).But here’s what we know: Economic cycles have...
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