• TSX +172.13
• DOW +44.29
• Dollar +.50c to 84.32USD
• Oil +$2.08 to $53.20US per barrel
• Gold -3.10 to $887.60USD per ounce
• Canadian 5 yr bond yields -.01bps to 2.00- Four weeks ago it was 1.88.
http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Today’s quote from www.canadianmortgagetrends.com that states what we have been saying for a few days now, that we may see a possible rate increase in the future triggered by the bond yields going up and the spread going down
*The yield, the rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield (and the decrease in spread) is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise.
April 29, 2009
5-Year Yields Break Above 2%
Earlier today, 5-year bond yields broke above 2% for the first time in 8 weeks.
Keep an eye on the chart. A further 10-20 basis point increase might prompt certain lenders to start lifting fixed mortgage rates.
If you’re considering a new fixed-rate mortgage or pre-approval, there has never been a better time to apply.
Obama eyes Canada as bank model
TORONTO STAR DAVID OLIVE BUSINESS COLUMNIST
Barack Obama, contemplating sweeping reforms to the U.S. financial system, cited Canada as a model worth emulating in an interview published yesterday.
"You know, I've looked at the evidence so far that indicates that other countries that have not seen some of the problems in their financial markets that we have nevertheless don't separate between investment banks and commercial banks," the U.S. president told New York Times economics columnistDavid Leonhart in a Times Magazine cover story yesterday. "They have a `supermarket' model that they've got strong regulation of."
"Like Canada?" Leonhart asked.
"Canada being a good example," Obama said. "And they've actually done a good job in managing through what was a pretty risky period in the financial markets."
"When it comes to something like investment banking versus commercial banking," Obama said, "the experience in a country like Canada would indicate that good, strong regulation that focuses less on the legal form of the institution and more on the functions that they're carrying out is probably the right approach to take."
Obama praised Canada's banking system in an earlier interview, in advance of the G20 meeting of world leaders in London last month. His more recent comments suggest Obama's economic team is closer to deciding on an approach to a long-anticipated overhaul of financial regulation in America, where the current global financial crisis has its origins.
Wall Street observers worry Obama might push for a breakup of America's largest banks and other financial institutions, often deemed "too big to fail," in order to make them easier to manage prudentially and to regulate.
At the very least, a rough consensus of observers believe, Obama would reinstitute the divorce of commercial from investment banking that Franklin Roosevelt forced in 1933, and which remained in effect until 1999. Not long after, America's disastrous housing boom got underway along with the distribution of "toxic" U.S. subprime, or `junk'," mortgages to lenders worldwide.
But the "Canadian option" of stricter regulations and stronger enforcement of them by a beefed-up existing regulatory regime would best fit Obama's approach of tweaking, rather than overturning, the status quo.
Canadian banks are limited by federal regulation to $20 in loans and other investments for each $1 in capital. The "reserve ratio" in the U.S. and Europe ranges as high as 40:1, a level of risk that some of the biggest world banks proved unable to handle when the U.S. housing boom collapsed in 2007 and default rates on mortgages soared.
All of Canada's six largest banks follow the supermarket model, having absorbed the securities industry and the trust sector in the 1980s. Only insurance, in which the banks merely dabble, remains mostly outside the banks' ambit, despite years of bank lobbying of Ottawa to allow the marketing of a wider range of insurance products.
As a result of their largely shunning the purchase of multimillion-dollar packages of U.S. junk mortgages, Canadian banks have earned international acclaim for their continued sound condition. But that had nothing to do with the Canadian banks' size or diversity of functions, and everything to do with prudent risk decisions and scrupulous regulatory supervision.
Canada's five largest banks now are among the 50 most valuable in the world. A decade ago, none were in those ranks.
Monday, May 4, 2009
Friday, May 1, 2009
Financial Update for May 1, 2009
• TSX -91.48tumbling from its highest level in more than 5 months as commodity shares turned lower and Chrysler's bankruptcy filing weighed on the market's mood.
• DOW -17.61
• Dollar +.69c to 83.82USD
• Oil +$..15 to $51.12US per barrel
• Gold -9.10 to $890.70USD per ounce
• Canadian 5 yr bond yields +.00bps to 2.01- Four weeks ago it was 1.82. http://www.financialpost.com/markets/market_data/money-yields-can_us.html
*The yield, the rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield (and the decrease in spread) is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise.
Canada splits with U.S. on accounting rules
Eoin Callan, Financial Post
Canada is splitting with the United States and aligning with Europe over how much discretion to give banks when they value distressed assets on their books.
The decision was confirmed Thursday by the Canadian Accounting Standards Board and marks a decisive shift by the country to align with international rules rather than move in lockstep with the U.S. sector.
The stance was affirmed despite an intensive lobbying effort by Bay Street to level the playing field with U.S. banks, to which Washington granted extra leeway in April.
Chief executives of the country's largest banks had sought political intervention from the highest level and made direct personal appeals to Jim Flaherty, the Finance Minister.
They asked Mr. Flaherty to use his influence during private one-on-one conversations with the Finance Minister, said people familiar with the discussions.
Ottawa subsequently brought pressure to bear on standard-setters, according to a person familiar with the matter.
But those efforts fell short in the face of appeals from the accounting industry and advocates for financial analysts and investors not to copy the unilateral action taken by Washington.
The Canadian body did, however, make a significant concession to Bay Street that lobbyists cheered as a victory.
After previously insisting it would avoid a piecemeal approach to setting rules about how companies' handle their books, the Canadian Accounting Standards Board Thursday said it had "decided to revise its standards on impairment of debt instruments."
The changes will allow banks more flexibility when valuing financial assets classified as "held-to-maturity" or "loans and receivables".
The body said the fresh rules would be circulated for comment and would "narrow the differences with new U.S. requirements".
The board said the rules brought Canada into line with the approach of the London-based International Accounting Standards Board.
The alignment with international rules was welcomed by the Canadian Advocacy Council (CAC), which represents financial analysts and investor interests.
Blair Carey, an analyst with the CAC, said that the "most important thing in the big picture" was that Canada was still moving towards global rules rather than "U.S. methods."
But he said the interference from Ottawa was "unwelcome and problematic".
Brad Smith, a financial analyst at Blackmont Capital, said: "Changing anything like this on the fly is always dangerous."
He added the compromise could ultimately undermine confidence in the Canadian financial system.
"Any moves towards a subjective, influence-driven way of doing things tells you the system is still broken," he said.
Vincent Papa, senior policy analyst at the Chartered Financial Analysts Institute, said the precise wording arrived at by rule-setters would leave auditors vulnerable to pressure to acquiesce to the demands of chief financial officers at banks seeking to avoid costly writedowns.
Canadian banks have recorded about $20-billion in losses on financial assets during the course of the credit crisis but avoided the heavier writedowns booked by foreign peers
• DOW -17.61
• Dollar +.69c to 83.82USD
• Oil +$..15 to $51.12US per barrel
• Gold -9.10 to $890.70USD per ounce
• Canadian 5 yr bond yields +.00bps to 2.01- Four weeks ago it was 1.82. http://www.financialpost.com/markets/market_data/money-yields-can_us.html
*The yield, the rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield (and the decrease in spread) is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise.
Canada splits with U.S. on accounting rules
Eoin Callan, Financial Post
Canada is splitting with the United States and aligning with Europe over how much discretion to give banks when they value distressed assets on their books.
The decision was confirmed Thursday by the Canadian Accounting Standards Board and marks a decisive shift by the country to align with international rules rather than move in lockstep with the U.S. sector.
The stance was affirmed despite an intensive lobbying effort by Bay Street to level the playing field with U.S. banks, to which Washington granted extra leeway in April.
Chief executives of the country's largest banks had sought political intervention from the highest level and made direct personal appeals to Jim Flaherty, the Finance Minister.
They asked Mr. Flaherty to use his influence during private one-on-one conversations with the Finance Minister, said people familiar with the discussions.
Ottawa subsequently brought pressure to bear on standard-setters, according to a person familiar with the matter.
But those efforts fell short in the face of appeals from the accounting industry and advocates for financial analysts and investors not to copy the unilateral action taken by Washington.
The Canadian body did, however, make a significant concession to Bay Street that lobbyists cheered as a victory.
After previously insisting it would avoid a piecemeal approach to setting rules about how companies' handle their books, the Canadian Accounting Standards Board Thursday said it had "decided to revise its standards on impairment of debt instruments."
The changes will allow banks more flexibility when valuing financial assets classified as "held-to-maturity" or "loans and receivables".
The body said the fresh rules would be circulated for comment and would "narrow the differences with new U.S. requirements".
The board said the rules brought Canada into line with the approach of the London-based International Accounting Standards Board.
The alignment with international rules was welcomed by the Canadian Advocacy Council (CAC), which represents financial analysts and investor interests.
Blair Carey, an analyst with the CAC, said that the "most important thing in the big picture" was that Canada was still moving towards global rules rather than "U.S. methods."
But he said the interference from Ottawa was "unwelcome and problematic".
Brad Smith, a financial analyst at Blackmont Capital, said: "Changing anything like this on the fly is always dangerous."
He added the compromise could ultimately undermine confidence in the Canadian financial system.
"Any moves towards a subjective, influence-driven way of doing things tells you the system is still broken," he said.
Vincent Papa, senior policy analyst at the Chartered Financial Analysts Institute, said the precise wording arrived at by rule-setters would leave auditors vulnerable to pressure to acquiesce to the demands of chief financial officers at banks seeking to avoid costly writedowns.
Canadian banks have recorded about $20-billion in losses on financial assets during the course of the credit crisis but avoided the heavier writedowns booked by foreign peers
Thursday, April 30, 2009
Financial Update for April 30, 2009
Indexes power ahead
• TSX +68.28
• DOW +168.28 In New York, stocks rallied after the Federal Reserve held interest rates steady, as expected, but issued a slightly more upbeat economic outlook.
• Dollar +1.15c to 83.18USD
• Oil +$.1.05 to $50.97US per barrel
• Gold +6.90 to $900.50USD per ounce
• Canadian 5 yr bond yields +.04bps to 2.01- Four weeks ago it was 1.73.
http://www.financialpost.com/markets/market_data/money-yields-can_us.html
The bond yield was up again, and this time over the 2.00 mark. Four weeks ago it was 1.73. So the spread is down to 1.77%. This may be the time to watch these yields and spreads very closely.
*The yield, which is the rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield (and the decrease in spread) is something to watch over the next week or so. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise (with all lenders).
In its statement, the the US Federal bank gave a more upbeat take on the economy than it has recently, although the tone remained cautious. The Fed said that "although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time."
The statement also said the pace of contraction appears to be somewhat slower, a belief that has helped lift stocks over the last two months
A reading on first-quarter gross domestic product showed the U.S. economy shrank at an annualized rate of 6.1%, much steeper than the 4.7% decline analysts expected, but still narrower than the 6.3% drop in the fourth quarter.
• TSX +68.28
• DOW +168.28 In New York, stocks rallied after the Federal Reserve held interest rates steady, as expected, but issued a slightly more upbeat economic outlook.
• Dollar +1.15c to 83.18USD
• Oil +$.1.05 to $50.97US per barrel
• Gold +6.90 to $900.50USD per ounce
• Canadian 5 yr bond yields +.04bps to 2.01- Four weeks ago it was 1.73.
http://www.financialpost.com/markets/market_data/money-yields-can_us.html
The bond yield was up again, and this time over the 2.00 mark. Four weeks ago it was 1.73. So the spread is down to 1.77%. This may be the time to watch these yields and spreads very closely.
*The yield, which is the rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield (and the decrease in spread) is something to watch over the next week or so. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise (with all lenders).
In its statement, the the US Federal bank gave a more upbeat take on the economy than it has recently, although the tone remained cautious. The Fed said that "although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time."
The statement also said the pace of contraction appears to be somewhat slower, a belief that has helped lift stocks over the last two months
A reading on first-quarter gross domestic product showed the U.S. economy shrank at an annualized rate of 6.1%, much steeper than the 4.7% decline analysts expected, but still narrower than the 6.3% drop in the fourth quarter.
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