Current Canadian Mortgage Information

Bank of Canada Increases Overnight Rate Target to 3/4 Per Cent

Roxanne — Tue, 20 Jul 2010 17:42:45 +0000

OTTAWA, July 20 /JAC/ – The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.

The global economic recovery is proceeding but is not yet self-sustaining. Greater emphasis on balance sheet repair by households, banks, and governments in a number of advanced economies is expected to temper the pace of global growth relative to the Bank’s outlook in its April Monetary Policy Report (MPR). While the policy response to the European sovereign debt crisis has reduced the risk of an adverse outcome and increased the prospect of sustainable long term growth, it is expected to slow the global recovery over the projection horizon. In the United States, private demand is picking up but remains uneven.

Economic activity in Canada is unfolding largely as expected, led by government and consumer spending. Housing activity is declining markedly from high levels, consistent with the Bank’s view that policy stimulus resulted in household expenditures being brought forward into late 2009 and early 2010. While employment growth has resumed, business investment appears to be held back by global uncertainties and has yet to recover from its sharp contraction during the recession.

The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.

Inflation in Canada has been broadly in line with the Bank’s April projection. While the Bank now expects the economy to return to full capacity at the end of 2011, two quarters later than had been anticipated in April, the underlying dynamics for inflation are little changed. Both total CPI and core inflation are expected to remain near 2 per cent throughout the projection period. The Bank will look through the transitory effects on inflation of changes to provincial indirect taxes.

Reflecting all of these factors, the Bank has decided to raise the target for the overnight rate to 3/4 per cent. This decision leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

Financial Update – June 11, 2010

Roxanne — Mon, 21 Jun 2010 19:29:43 +0000

US markets slipped at the open after a disappointing retail sales figure, but clawed their way back after an index of consumer confidence climbed to its highest level in two years. May’s retail sales fell 1.2%, although the majority of retail sectors posted gains during the month. Automobile sales unexpectedly declined, while sales of building materials dropped sharply after the tax-rebate induced rush on major appliances over the preceding months. Research in Motion and Motorola appear to have buried the hatchet, agreeing to cross-license various patents and end all outstanding litigation between the companies. Large cap companies in the TSX index are broadly but mildly higher his morning, with Bell Canada being the only noticeably weak issue after touching a new 52-week high yesterday. The TSX is up 40 pts. The Dow is down 8 pts.

The Canadian dollar is soft this morning as oil retreats from yesterday’s run-up, slipping 38 bps to US$.9658. Bond yields are steady at 2.76% for the 5-year Canada and 3.41% for the ten. Gold is up $4 to US$1226.20/oz. Oil is off 84 cents to US$74.64/barrel.

Financial Update – May 6, 2010

Roxanne — Thu, 06 May 2010 18:11:19 +0000

The TSX index has been on a bit of a rollercoaster this morning as a continuation of strong earnings reports is offset by profit taking after a year-long run-up in equities. Canadian insurer Manulife reported profits that exceeded average estimates by a wide margin, causing a decent jump in their share price. Bell Canada and auto parts manufacturer Magna Int’l also beat forecasts, with the latter announcing plans to eliminate its dual share structure which is helping send the stock 15% higher this morning. Canadian building permits jumped 12% in March, beating every economists estimate. Initial jobless claims in the US declined for the third consecutive week, in line with forecasts. The TSX is down 42 pts. The Dow is down 100 pts.

The Canadian dollar is getting rather badly bruised as the risk trade is “off” at the moment, sending commodity prices lower and the greenback higher. The Loonie is down almost a full penny at US$.9624. Bond yields continue to sink, partly due to the flight to quality but also due to the fact that European debt concerns may filter down to any rate decisions by the Bank of Canada. The 5-year Canada bond yields 2.80% and the 10-year 3.48%. Oil is down $1.13 to US$78.84/barrel. Gold is up $11.30 to US$1186.30/oz.

Financial Update – May 2, 2010

Roxanne — Wed, 05 May 2010 05:36:19 +0000

American markets are strong this morning after manufacturing activity climbed at the fastest pace in six years, and due to a weekend agreement between the European Union, the IMF and the beleaguered Greek government. Terms of the deal will extend a three-year lifeline to Greece as they get their economic house in order, including such measures as tax hikes, wage freezes and pension cuts. The ISM manufacturing index climbed to 60.4 in March, with the ISM services sector index due on Wednesday. Employment reports from both sides of the border are due out Friday. The mining sector in general is weak this morning after Australia announced a 40% tax on profits from resource firms, while China raised banks reserve requirements for the third time this year. The TSX is down 23 pts. The Dow is up 88 pts.

The Canadian dollar is climbing this morning as oil prices rise, up a third of a penny to US$.9878. Bond yields are steady with the 5-year Canada yielding 3.01% and the 10-year 3.67%. Gold is up $4.80 to US$1185.50/oz. Oil is up 42 cents to US$86.57/barrel.

Financial Update – Mar 30, 2010

Roxanne — Tue, 30 Mar 2010 17:52:24 +0000

North American markets opened stronger this morning after reports on both consumer confidence and US home prices were better than expected. The seasonally adjusted figures for residential real estate prices climbed for the eighth straight month in January, while the annual rate of change will almost assuredly break into positive territory in the months to come. Consumer confidence climbed this month as more Americans perceive the employment situation is beginning to improve. Greece managed to raise half of the total funds required to roll over their debt in a 7-year note auction yesterday, but the subsequent 12-year note was undersubscribed.

The TSX is up 19 pts. The Dow is up 12 pts.

The Canadian dollar is slightly higher this morning at US$.9806. Bond yields continue to rise on the positive economic data with the 5-year Canada yield up to 2.93% and the 10-year to 3.59%. Gold is down $7 to US$1103.30/oz. Oil is up 12 cents to US$82.30/barrel.

Financial Update – Mar 26, 2010

Roxanne — Fri, 26 Mar 2010 16:06:12 +0000

Markets climbed at the open this morning as news of an agreement on aid for Greece lifts investors’ appetite for risk. European leaders backed a proposal that would see emergency funding available to Greece should conditions worsen, backed in part by the IMF. The package of loans would carry an interest rate higher than current market rates as an incentive for Greece to return to market financing as soon as possible. Helping matters this morning was a slightly better than expected consumer sentiment index, as well as a rash of analyst upgrades on companies such as Apple and Research in Motion. The TSX is up 60 pts. The Dow is up 62 pts.

The Loonie is paring recent gains, shedding another 40 bps this morning to US$.9718. Bond yields have climbed higher with the 5-year Canada yielding 2.87% and the 10-year 3.57%. Oil is off a quarter to US$80.26/barrel. Gold is up $10 to US$1102.90/oz.

Inflation higher than expected: Carney

Roxanne — Wed, 24 Mar 2010 19:26:02 +0000

It appears that the possibility of increased rates is getting closer to becoming a reality – but not likely until mid-summer – if then.

Once again, opinions on this vary widely, but the ‘noise levels’ are increasing.

Bank of Canada boss calls country’s productivity record ‘abysmal’

Last Updated: Wednesday, March 24, 2010 | 3:00 PM ET Comments36 Recommend16

CBC News

Bank of Canada governor Mark Carney appeared to send signals Wednesday intended to prepare Canadians for an increase in interest rates, spurred by concerns about inflation.

But there was nothing that suggested the bank will move earlier than the widely expected date of midsummer.

‘Core inflation has been slightly firmer than projected,’ Bank of Canada governor Mark Carney says. (Sean Kilpatrick/Canadian Press)

Inflation has been rising more than the bank expected, Carney acknowledged in a speech to a conference in Ottawa put on by the Canadian Association for Business Economics.

“Core inflation has been slightly firmer than projected,” he said.

The core inflation rate excludes more volatile prices for food and energy and is closely watched by the Bank of Canada in making decisions about whether to increase rates.

The bank lowered its overnight target interest rate last April to a record low 0.25 per cent and said it would more than likely keep it there until July of this year.

At the same time, it predicted the core rate would fall short of its target annual rate of two per cent until the second half of next year.

Core-rate increase higher than predicted

But Statistics Canada reported on Friday that the annualized core rate in February was 2.1 per cent, up from two per cent in January, and ahead of most economists’ predictions of 1.7 per cent.

On March 2, the bank reconfirmed its plans to hold off on any rate increase until the summer, but today Carney warned that this is conditional on the outlook for inflation. The bank will update that outlook in its next monetary policy report, to be released April 22.

Sal Guatieri, senior economist with BMO Capital Markets, told CBC News there’s nothing in Carney’s speech that suggests the bank is “itching” to raise interest rates.

“We think the bank is still committed to keeping interest rates on hold at least until the middle of this year but then will begin to gradually raise interest rates starting in July,” Guatieri said.

Countering the case for raising rates are concerns about high debt levels affecting Greece, Spain and Portugal, a U.S. housing market that continues to “wobble” and the prospect of the Canadian dollar reaching parity with the U.S. dollar this summer, Guatieri said.

Takes aim at productivity

Carney also took aim at Canadian businesses for failing to invest enough in productivity growth, the measure of the increase in value of goods and services produced by each working Canadian.

Describing Canada’s record as “abysmal,” he predicted that if the trend isn’t reversed, falling productivity could cost every Canadian $30,000 in income over the next decade.

He criticized business for not investing more in new technology and training, and the country for not putting more into in training workers to improve their skills with computers and communications technology.

Carney said Canadians are well educated but not in the areas where they could be most competitive internationally.

He also called for the country to foster more competition in the telecommunications, electricity, and retail industries.

Financial Update – Mar 24, 2010

Roxanne — Wed, 24 Mar 2010 17:05:48 +0000

North American markets are taking a step back this morning after yesterday’s decent rally, mainly due to lingering concerns over Europe’s debt problems. Lack of support for a financial bailout of Greece continues to cloud their future, leading to speculation that they will either default on their debt or be forced to secede from the EU in order to devalue their currency to make themselves more competitive. Meanwhile, the rating on Portugal’s debt was downgraded a notch this morning. Sales of new homes in the US fell to the lowest level on record in February as foreclosures of existing homes sap demand for newly constructed homes, however much of the weakness is being blamed on the poor weather last month. Of note, sales in the West, which was not affected by severe weather, climbed by 21% and posted the biggest year-over-year increase since 2004. Durable goods orders rose in line with forecasts, while the backlog of unfilled orders continues to point to a sustained recovery in the manufacturing sector. The TSX is down 44 pts. The Dow is down 20 pts.

The Canadian dollar is losing steam as currency flows into the safe-haven greenback. The Loonie has shed three-quarters of a penny this morning to US$.9786. Bond yields climbed ahead of BoC Governor Mark Carney’s speech due later today, as the market will look for clues on the timing of future rate increases. The 5-year Canada yields 2.82% and the 10-year 3.51%. Gold is down $13.40 to US$1090.30/oz. Oil is down $1.16 to US$80.75/barrel.

Financial Update – Mar 23, 2010

Roxanne — Tue, 23 Mar 2010 16:32:36 +0000

North American markets are strengthening this morning amid moderately decent economic news, sending the Dow to a new bull-market high. Heavyweights such as Intel and General Electric are breaking through to highs not seen since the days following Lehman Brothers collapse, while each one of the major Canadian banks have climbed to fall-2007 levels. US existing home sales slid for a third consecutive month in February, however the number of transactions was a bit better than expected. Meanwhile the index of Canadian leading economic indicators climbed for the ninth consecutive month, making this the second-strongest advance in a half century. The TSX is up 41 pts. The Dow is up 21 pts.

The Loonie is slightly higher this morning after slipping the last three days, up 8 bps to US$.9833. Bond yields drifted lower to 2.77% for the 5-year Canada and 3.44% for the ten. Gold is up $3.80 to US$1103.30/oz. Oil is up 15 cents to US$81.75/barrel.

Financial Update – Mar 22, 2010

Roxanne — Mon, 22 Mar 2010 22:40:46 +0000

Mixed markets in North American this morning as declines in energy and gold weigh on the TSX, while the passage of a trillion dollar healthcare bill south of the border is having a positive effect on US indexes. The obvious winners of a revised healthcare system include the care providers and drug manufacturers who will add some 32 million potential customers to the mix. The insurers face a future of higher government regulation. India’s surprise interest rate hike before the weekend continues to have an effect on commodities as they try to slow down growth amid accelerating inflation. The TSX is down 26 pts. The Dow is up 37 pts.

The Loonie is paring recent gains, slipping 35 bps this morning to US$..9804. Bond yields have climbed at the short end of the curve to 2.80% for the 5-year Canada, while the 10-year remains stuck at 3.47%. Gold is down $10 to US$1097.60/oz. Oil is down a quarter to US$80.43/barrel.