· TSX -80.00(Reuters) dragged lower by the information technology sector as shares of Research In Motion dropped 15.4% on a profit warning
· DOW +50.65
· Dollar +.22c to 80.46USD
· Oil -$1.61 to $35.94US per barrel. on persistent concerns that the recession will further erode demand and leave too much supply in the market
· Gold +30.10 to $943.80 USD per ounce Gold stocks were the bright light during Wednesday's session
· Canadian 5 yr bond yields .0bps to 2.12
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Reuters WASHINGTON -- U.S. congressional negotiators Wednesday reached a deal on US$789-billion in emergency spending and tax cuts, handing a big victory to President Barack Obama in his effort to pull the economy out of a steep tailspin.
Negotiators in the House and Senate overcame an apparent last-minute snag on funding to help states plug growing budget deficits and money to renovate schools that Mr. Obama had sought.
The huge package is aimed at reversing a deep recession and news of the compromise sent U.S. stock markets higher
First trade deficit in a generation Gary Norris The Canadian Press In a watershed economic event, Canada has tallied its first monthly trade deficit since 1976 -- a year of demoralizing stagflation when over a million workers took to the streets in a day of protest against the Trudeau government's economic policies.
Statistics Canada reported yesterday that merchandise imports exceeded exports by $458 million in December.
It was a sharp reversal from a surplus of $1.2 billion in November, and economists -- who generally had expected a surplus of about $500 million -- said the trade picture could remain bleak indefinitely.
The art of mortgage renegotiation
ROB CARRICK Globe and Mail Report on Business
Falling mortgage rates have revealed yet another way the banks are charging their clients more in these financially stressful times.
Rates on mortgages have fallen a lot in the past several months, prompting many people to ask about renegotiating in order to cut costs. “The bulk of my business today is people breaking their mortgages,” said Jim Tourloukis, a mortgage broker with Advent Mortgage Services in Markham, Ont.
The problem in breaking a mortgage is the penalty that lenders charge. Banks typically have two ways to calculate the penalty and recently they've switched to the more expensive one.
A little context may help you gauge how annoyed you should be about this. With a recession and global financial crisis hurting their revenues, the banks have been pushing up interest rates on lines of credit, charging more in service fees and adjusting credit card rules to extract more money from clients. Mortgage penalties are somewhat different in that they're mainly influenced by what's happening with interest rates.
It's boilerplate in mortgage contracts for penalties associated with breaking a loan to be set at the greater of three months' interest or the difference between the interest the bank could make on your mortgage as originally arranged versus lending money out at current rates.
Mr. Tourloukis explained that three months' interest was the typical penalty until rates began to fall hard in the past couple of months. Now, the so-called interest rate differential, or IRD, is the larger penalty.
“The spread between the client's rate and what banks can lend money for now has grown dramatically,” he said.
If you have any thoughts of breaking your mortgage, get on it today. If mortgage rates fall further, and they could ease a little bit more, then interest rate differentials will grow in size and cost you more.
Mortgage brokers say breaking your mortgage is worth some thought if your current rate is in the low 5-per-cent range or more. Mr. Tourloukis said he's been renegotiating five-year, fixed-rate mortgages at 3.99 per cent for clients who several months ago signed up for similar loans at 5.79 per cent. Other mortgage brokers are showing five-year rates in the low 4-per-cent range.
The first step in breaking a mortgage: Ask your lender what your penalty would be. There's no standardized calculation of penalties, so your number will depend on your lender's own policies and personal circumstances like the amount you've borrowed and the number of years left on your mortgage.
In some cases, breaking your mortgage just won't make sense because of the steep IRD amount.
“If you have a lot of time left on your term, it could be deadly,” said Vince Gaetano, vice-president at Monster Mortgage in Toronto.
Practices vary widely among banks, but one method for calculating the IRD is to compare a client's original rate against the posted rate for the term that corresponds with the remaining time left on the mortgage. Example: You're two years into a five-year mortgage, so your IRD would be calculated using the current posted three-year rate.
Once you know your penalty, ask your lender to show you how much interest you'd save by renegotiating with the best possible current rate. If the penalty overwhelms the potential savings, then you have a couple of options beyond giving up.
One is to try and negotiate the penalty lower, or have it eliminated altogether. Mr. Tourloukis said lenders have the discretion to help clients out this way.
Another is to chop the amount of money you owe on your mortgage, thereby reducing the penalty for breaking the loan. The way to do this is to take advantage of the prepayment privileges built into most mortgages.
For example, you might be allowed to prepay as much as 20 per cent of your outstanding balance in a year without incurring any charges. Make this lump-sum payment and then get a quote on the penalty to break your newly shrunken mortgage.
There are a couple of strategies to look at if you'd benefit from breaking your mortgage but can't afford the penalty charge.
One is to take the cost and add it to your mortgage balance. In some cases you'll still end up paying less interest than if you stayed with your current mortgage.
Another possibility is a blend and extend, where you jump into a new mortgage that blends your existing rate with the lower current rate and extends your term by a few years. There's no penalty charged in a blend and extend, but you won't save as much as you would if you paid the penalty and got the best possible current interest rate.
“If you want the better rate, you have to come up with the cash,” Mr. Gaetano said.
Thursday, February 12, 2009
Wednesday, February 11, 2009
Financial Update for Feb. 11, 2009
"We don't do optimism; we don't do pessimism; we do realism at the Bank of Canada," he said.
"We don't do spin." Mark Carney
· TSX -229.39(Reuters) Snapping a 5 session winning streak, the TSX and the Canadian dollar tumbled on disappointment with U.S. Treasury Secretary Timothy Geithner's plan to help the financial sector.
· DOW -381.99 The new bank rescue plan in the US landed with a thud on Wall Street. Worried that the revamped financial bailout was far too short on details, especially on how to clean up the books of the banks, investors sent the Dow Jones industrials tumbling
· Dollar -1.97c to 80.24USD
· Oil -$2.01 to $37.55US per barrel.
· Gold +21.40 to $914.20 USD per ounce
· Canadian 5 yr bond yields +.4bps to 1.97
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Julian BeltrameThe Canadian Press OTTAWA
Canada's economy can bounce back next year, but only if the United States and other world governments take "exceptional'' measures to end the crisis in financial markets, says Bank of Canada governor Mark Carney.
The hopeful and sobering assessment comes a month after the central banker put his credibility on the line with what other economists called an overly optimistic forecast pointing to a strong rebound next year after a tough 2009.
''Decisions taken in the coming weeks in the United States and in other major economies to isolate toxic assets in order to create a core of 'good' banks will be critical,'' Carney said in his first appearance before the House of Commons finance committee since the recession hit Canada in the fall.
'If these national and multilateral measures are not timely, bold, and well-executed, Canada's economic recovery will be both attenuated and delayed.''
Shortly after Carney spoke, the U.S. Senate approved President Barack Obama's giant economic stimulus measure, part of a string of powerful government steps that could marshal close to $3 trillion US in taxpayer and private money to revive the collapsing U.S. economy.
The 61-37 vote by the Senate was a key victory for Obama but sets up tough talks with the House of Representatives, which passed a slightly different version than the $838 billion bill approved yesterday.
In another development yesterday, a senior Canadian Finance Department official called the U.S. Senate approval and the pending passage of a bailout package helpful in helping stabilize the financial system and restarting the flow of credit.
The U.S. plan will be a topic at the weekend meeting in Rome of G7 finance ministers and central bank governors where Finance Minister Jim Flaherty is expected to be the lead speaker on a discussion on financial markets.
In his Commons committee appearance, Carney pointed to the U.S. bailout bill as an example of the extraordinary policy initiatives he believes can rescue the global economy. In Canada, MPs approved in principle last week the federal government's budget containing a $40-billion stimulus -- initiatives Carney believes will fully kick in in 2010.
Under skeptical questioning from MPs, the central banker stuck to his prediction of a 3.8 per cent growth in 2010 and dismissed criticism that his forecast was overly rosy.
''We don't do optimism; we don't do pessimism; we do realism at the Bank of Canada,'' he said.
"We don't do spin.''
Liberal finance critic John McCallum was encouraged by Carney's optimism, but said he is not convinced the Harper government is committed to rolling out the $40-billion stimulus contained in the budget as quickly and effectively as possible.
Although Canada is doing slightly better than the U.S., McCallum noted that 129,000 jobs were lost in January alone, while personal bankruptcies soared by 51 per cent nationally in December from a year ago -- indications the slump is broadening.
The TD Bank has estimated job losses could hit 325,000 by year's end, pushing the unemployment rate to 8.8 per cent.
In another sign of the bleak times, General Motors Corp. became the latest of a growing list of companies announcing massive layoffs. It said it is cutting 10,000 salaried employees worldwide, including an unspecified number in Canada, where the company has 2,000 white collar workers.
Economists expect the Canadian economy to shrink by more than one per cent this year as the troubled manufacturing sector in Ontario and Quebec continues to shed employment and resources industries in Western Canada cut jobs to cope with lower prices for oil, grain, metals and minerals.
"We don't do spin." Mark Carney
· TSX -229.39(Reuters) Snapping a 5 session winning streak, the TSX and the Canadian dollar tumbled on disappointment with U.S. Treasury Secretary Timothy Geithner's plan to help the financial sector.
· DOW -381.99 The new bank rescue plan in the US landed with a thud on Wall Street. Worried that the revamped financial bailout was far too short on details, especially on how to clean up the books of the banks, investors sent the Dow Jones industrials tumbling
· Dollar -1.97c to 80.24USD
· Oil -$2.01 to $37.55US per barrel.
· Gold +21.40 to $914.20 USD per ounce
· Canadian 5 yr bond yields +.4bps to 1.97
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Julian BeltrameThe Canadian Press OTTAWA
Canada's economy can bounce back next year, but only if the United States and other world governments take "exceptional'' measures to end the crisis in financial markets, says Bank of Canada governor Mark Carney.
The hopeful and sobering assessment comes a month after the central banker put his credibility on the line with what other economists called an overly optimistic forecast pointing to a strong rebound next year after a tough 2009.
''Decisions taken in the coming weeks in the United States and in other major economies to isolate toxic assets in order to create a core of 'good' banks will be critical,'' Carney said in his first appearance before the House of Commons finance committee since the recession hit Canada in the fall.
'If these national and multilateral measures are not timely, bold, and well-executed, Canada's economic recovery will be both attenuated and delayed.''
Shortly after Carney spoke, the U.S. Senate approved President Barack Obama's giant economic stimulus measure, part of a string of powerful government steps that could marshal close to $3 trillion US in taxpayer and private money to revive the collapsing U.S. economy.
The 61-37 vote by the Senate was a key victory for Obama but sets up tough talks with the House of Representatives, which passed a slightly different version than the $838 billion bill approved yesterday.
In another development yesterday, a senior Canadian Finance Department official called the U.S. Senate approval and the pending passage of a bailout package helpful in helping stabilize the financial system and restarting the flow of credit.
The U.S. plan will be a topic at the weekend meeting in Rome of G7 finance ministers and central bank governors where Finance Minister Jim Flaherty is expected to be the lead speaker on a discussion on financial markets.
In his Commons committee appearance, Carney pointed to the U.S. bailout bill as an example of the extraordinary policy initiatives he believes can rescue the global economy. In Canada, MPs approved in principle last week the federal government's budget containing a $40-billion stimulus -- initiatives Carney believes will fully kick in in 2010.
Under skeptical questioning from MPs, the central banker stuck to his prediction of a 3.8 per cent growth in 2010 and dismissed criticism that his forecast was overly rosy.
''We don't do optimism; we don't do pessimism; we do realism at the Bank of Canada,'' he said.
"We don't do spin.''
Liberal finance critic John McCallum was encouraged by Carney's optimism, but said he is not convinced the Harper government is committed to rolling out the $40-billion stimulus contained in the budget as quickly and effectively as possible.
Although Canada is doing slightly better than the U.S., McCallum noted that 129,000 jobs were lost in January alone, while personal bankruptcies soared by 51 per cent nationally in December from a year ago -- indications the slump is broadening.
The TD Bank has estimated job losses could hit 325,000 by year's end, pushing the unemployment rate to 8.8 per cent.
In another sign of the bleak times, General Motors Corp. became the latest of a growing list of companies announcing massive layoffs. It said it is cutting 10,000 salaried employees worldwide, including an unspecified number in Canada, where the company has 2,000 white collar workers.
Economists expect the Canadian economy to shrink by more than one per cent this year as the troubled manufacturing sector in Ontario and Quebec continues to shed employment and resources industries in Western Canada cut jobs to cope with lower prices for oil, grain, metals and minerals.
Tuesday, February 10, 2009
Financial Update for Feb. 10, 2009
· TSX +39.26 to 9,047 (Reuters)supported by financials a day before U.S. Treasury Secretary is to unveil an overhaul of the US$700-billion aid plan for the financial sector
· DOW-9.72
· Dollar +.69c to 82.21USD as hopes that U.S. bank bailout and stimulus plans will help revive the global economy lured some traders to riskier assets like the domestic currency.
· Oil -$.61 to $39.56US per barrel. Oil prices fell as another round of poor company earnings and job cuts tempered an OPEC announcement that dozens of production projects were being tabled
· Gold -21.50 to 892.80 USD per ounce
· Canadian 5 yr bond yields +.4bps to 1.97
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
By David Friend, The Canadian Press -
Canadian consumers and businesses are going bust at an alarming rate as the sputtering domestic economy continues to show signs of further trouble ahead.
Bankruptcy filings soared nearly 46.7 per cent in December, the Office of the Superintendent of Bankruptcy said Monday.
The report by the federal monitoring agency found that 8,299 individuals and businesses went bankrupt in December, up from 5,659 for December 2007.
Home-market 'correction is in full swing': construction, sales, prices down
By Brenda Bouw, The Canadian Press
There are more signs Canada's housing market is facing a significant slowdown after a double-digit percentage drop in home construction starts last month and a forecast that sales and prices will slide this year.
As the recession digs in and the unemployment rate rises, economists say nervous consumers are standing still when it comes to buying and selling real estate.
The results are increasing numbers of dwellings on the market, dropping prices and a slowdown in construction.
"The Canadian housing correction is in full swing, having a wide impact across the country," BMO Capital Markets economist Robert Kavcic commented Monday.
Canada Mortgage and Housing Corp. reported housing starts fell to a seasonally adjusted annual rate of 153,500 units in January, down 10.9 per cent from December in the steepest monthly drop since March 1995.
It was the fifth straight decline and left home construction at its slackest pace since 2001, well below market expectations of 169,000.
Also Monday, the Canadian Real Estate Association predicted house prices nationally will fall eight per cent this year as the number of Multiple Listing Service sales tumbles 16.9 per cent to 360,900 units.
Three months ago, the association was forecasting only a 2.1 per cent price slippage for 2009 on a three per cent decline in the number of sales.
Its latest forecast would represent the smallest national MLS sales volume since 2000, following a 17.1 per cent drop in 2008.
Gregory Klump, chief economist for the association, said that although there were some incentives for home buyers in the recent federal budget, "they won't take hold until there is an improvement in buyer psychology."
The Jan. 27 budget included a plan to expand the insured mortgage purchase program by $50 billion to $125 billion, which is meant to encourage banks to increase mortgage lending.
Ottawa also increased the RRSP withdrawal limit for qualified home buyers to $25,000 from $20,000, and introduced up to $750 in tax relief for closing costs for first-time buyers.
The real estate association said sales are expected to fall in every province this year, led by declines of about 19 per cent in British Columbia, Alberta and Ontario.
B.C and Alberta, which have seen the biggest price jumps in recent years, are expected to see home prices fall the most, by 10.6 per cent and 8.9 per cent respectively.
Meantime, the average home price in Newfoundland and Labrador is forecast to rise 4.8 per cent - the only province forecast to see an increase.
CIBC economist Benjamin Tal said he is forecasting a sales drop of about 15 per cent and price decline of about 10 per cent nationwide this year.
Tal said the Canadian housing market is in a "correction, not a free fall. However, "the recovery will not be very quick."
Scotiabank economist Adrienne Warren said the home market is in "retrenchment mode."
"It's no surprise that home builders are pulling back, facing slowing demand and increasing amounts of unsold inventory," Warren said.
"What you are also seeing now is that the condo market has finally cooled off."
Still, Warren said Canada has nowhere near the housing crisis as the United States, where risky lending has made foreclosure sales common.
CMHC said in its report that overall housing starts declined across the country, with a lot of the steam coming off the hot market that had prevailed in most of Western Canada.
"Reduced sales and increased listings in the existing-home market have led to reduced spillover demand in the new-home market," stated Bob Dugan, the Crown corporation's chief economist.
On a seasonally adjusted basis, January's starts were down from December by 30.3 per cent on the Prairies, 29.1 per cent in British Columbia, 14.6 per cent in Ontario, 8.6 per cent in Atlantic Canada and 1.4 per cent in Quebec.
"Western Canada in particular continues to see activity fall off a cliff, with starts in B.C. at the lowest level since 2002, and in Alberta the weakest since 1996," BMO's Kavcic wrote in a note. "Both provinces are seeing activity at half year-ago levels."
And last month's steep national drop in single-family-unit starts "adds further downside risk to economic growth forecasts," commented TD Bank economist Pascal Gauthier.
Gauthier said single-unit construction is generally less volatile than multiple-unit starts, and the sharp downturn "bodes poorly for the private residential investment component of real GDP growth."
The TD commentary added that improved home affordability will likely support starts this year at the pre-boom level of about 150,000, but "if starts continue on this downward momentum without signs of stabilization ... even this prudent forecast could fall by the wayside
· DOW-9.72
· Dollar +.69c to 82.21USD as hopes that U.S. bank bailout and stimulus plans will help revive the global economy lured some traders to riskier assets like the domestic currency.
· Oil -$.61 to $39.56US per barrel. Oil prices fell as another round of poor company earnings and job cuts tempered an OPEC announcement that dozens of production projects were being tabled
· Gold -21.50 to 892.80 USD per ounce
· Canadian 5 yr bond yields +.4bps to 1.97
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
By David Friend, The Canadian Press -
Canadian consumers and businesses are going bust at an alarming rate as the sputtering domestic economy continues to show signs of further trouble ahead.
Bankruptcy filings soared nearly 46.7 per cent in December, the Office of the Superintendent of Bankruptcy said Monday.
The report by the federal monitoring agency found that 8,299 individuals and businesses went bankrupt in December, up from 5,659 for December 2007.
Home-market 'correction is in full swing': construction, sales, prices down
By Brenda Bouw, The Canadian Press
There are more signs Canada's housing market is facing a significant slowdown after a double-digit percentage drop in home construction starts last month and a forecast that sales and prices will slide this year.
As the recession digs in and the unemployment rate rises, economists say nervous consumers are standing still when it comes to buying and selling real estate.
The results are increasing numbers of dwellings on the market, dropping prices and a slowdown in construction.
"The Canadian housing correction is in full swing, having a wide impact across the country," BMO Capital Markets economist Robert Kavcic commented Monday.
Canada Mortgage and Housing Corp. reported housing starts fell to a seasonally adjusted annual rate of 153,500 units in January, down 10.9 per cent from December in the steepest monthly drop since March 1995.
It was the fifth straight decline and left home construction at its slackest pace since 2001, well below market expectations of 169,000.
Also Monday, the Canadian Real Estate Association predicted house prices nationally will fall eight per cent this year as the number of Multiple Listing Service sales tumbles 16.9 per cent to 360,900 units.
Three months ago, the association was forecasting only a 2.1 per cent price slippage for 2009 on a three per cent decline in the number of sales.
Its latest forecast would represent the smallest national MLS sales volume since 2000, following a 17.1 per cent drop in 2008.
Gregory Klump, chief economist for the association, said that although there were some incentives for home buyers in the recent federal budget, "they won't take hold until there is an improvement in buyer psychology."
The Jan. 27 budget included a plan to expand the insured mortgage purchase program by $50 billion to $125 billion, which is meant to encourage banks to increase mortgage lending.
Ottawa also increased the RRSP withdrawal limit for qualified home buyers to $25,000 from $20,000, and introduced up to $750 in tax relief for closing costs for first-time buyers.
The real estate association said sales are expected to fall in every province this year, led by declines of about 19 per cent in British Columbia, Alberta and Ontario.
B.C and Alberta, which have seen the biggest price jumps in recent years, are expected to see home prices fall the most, by 10.6 per cent and 8.9 per cent respectively.
Meantime, the average home price in Newfoundland and Labrador is forecast to rise 4.8 per cent - the only province forecast to see an increase.
CIBC economist Benjamin Tal said he is forecasting a sales drop of about 15 per cent and price decline of about 10 per cent nationwide this year.
Tal said the Canadian housing market is in a "correction, not a free fall. However, "the recovery will not be very quick."
Scotiabank economist Adrienne Warren said the home market is in "retrenchment mode."
"It's no surprise that home builders are pulling back, facing slowing demand and increasing amounts of unsold inventory," Warren said.
"What you are also seeing now is that the condo market has finally cooled off."
Still, Warren said Canada has nowhere near the housing crisis as the United States, where risky lending has made foreclosure sales common.
CMHC said in its report that overall housing starts declined across the country, with a lot of the steam coming off the hot market that had prevailed in most of Western Canada.
"Reduced sales and increased listings in the existing-home market have led to reduced spillover demand in the new-home market," stated Bob Dugan, the Crown corporation's chief economist.
On a seasonally adjusted basis, January's starts were down from December by 30.3 per cent on the Prairies, 29.1 per cent in British Columbia, 14.6 per cent in Ontario, 8.6 per cent in Atlantic Canada and 1.4 per cent in Quebec.
"Western Canada in particular continues to see activity fall off a cliff, with starts in B.C. at the lowest level since 2002, and in Alberta the weakest since 1996," BMO's Kavcic wrote in a note. "Both provinces are seeing activity at half year-ago levels."
And last month's steep national drop in single-family-unit starts "adds further downside risk to economic growth forecasts," commented TD Bank economist Pascal Gauthier.
Gauthier said single-unit construction is generally less volatile than multiple-unit starts, and the sharp downturn "bodes poorly for the private residential investment component of real GDP growth."
The TD commentary added that improved home affordability will likely support starts this year at the pre-boom level of about 150,000, but "if starts continue on this downward momentum without signs of stabilization ... even this prudent forecast could fall by the wayside
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