· TSX -105.44pts
· Dow -161.52pts
· Dollar -.27c to $96.50US.
· Oil -$2.76 to $106.61US per barrel pressured partly by falls in demand in the United States, the world's top energy consumer. Fears the crisis in the financial sector could tip the global economy into recession has also weighed on the market
· Gold +43.30 to $903.90US per ounce
Further to discussions about cost of funds increasing and the banks saving room on their balance sheet for only their own business and not for non bank lenders as was previous practice…from CBC news today, the BOC has made available $2B to chartered banks to encourage them to lend money and help improve liquidity in the credit markets.
An interesting comment is found about halfway down:
"But in Canada it really is a function that the (chartered) banks are being unusually cautious and the Bank of Canada is looking to grease the wheel a little bit."
Lascelles said Canadians have enjoyed reasonable access to credit in the past year in the wake of the meltdown in the U.S. subprime mortgage business.
------------------------------------------------
Canadian central bank antes up $2 billion in liquidity to loosen credit markets
Published: Tuesday, September 23, 2008 12:08 PM ET
Canadian Press: Julian Beltrame, THE CANADIAN PRESS
OTTAWA - The Bank of Canada said Tuesday it will make another $2-billion available this week to commercial banks, the second special injection of funds that it has made into the financial system in recent days.
In essence, the central bank is making a total of $4 billion in extra money available to the system in the short term in order to keep commercial lending flowing in difficult times.
The central bank said Tuesday it will relax credit conditions to allow the chartered banks to borrow up to an additional $2 billion for 84 days starting Sept. 24. That injection matures Dec. 18.
At the same time, it announced that last week's $2-billion purchase and resale agreement - which expires Oct. 17 - will be extended for an additional 27 days, until Nov. 13.
Global financial markets were in danger of seizing up last week following the rapid collapse of several large Wall Street titans that had became overexposed to the U.S. subprime mortgage crisis.
The Bush administration has proposed a US$700 billion rescue package from the U.S. government to prevent more failures and restore confidence in the American financial system.
By those standards, says TD Bank economist Eric Lascelles, what Canada is doing is small potatoes.
"To the extent that the U.S. is effected, Canada always gets painted with the same brush," he said.
"But in Canada it really is a function that the (chartered) banks are being unusually cautious and the Bank of Canada is looking to grease the wheel a little bit."
Lascelles said Canadians have enjoyed reasonable access to credit in the past year in the wake of the meltdown in the U.S. subprime mortgage business.
Meanwhile, Finance Minister Jim Flaherty and Prime Minister Stephen Harper have sought to reassure Canadians in the past few days that Canada's banks are fundamentally sound, saying they are better financed than their U.S. counterparts.
In a conference call with reporters Monday, the finance minister said Canada would not be following the same route as the U.S. in trying to buy up toxic assets to ensure the stability of its financial institutions. Nor is there need, Flaherty said.
"We do not see that type of risk with Canadian financial institutions in banking or insurance," Flaherty said.
The central bank's two-page announcement Tuesday included a long list of collateral it will accept from financial institutions seeking to dip into the short-term loan fund.
These include:
-Securities issued by the federal or provincial governments;
-Government of Canada stripped coupons and residuals;
-Bankers' acceptances and promissory notes;
-Commercial paper and short-term municipal paper;
-Corporate, municipal and foreign-issuer bonds subject to specified credit ratings;
-Asset-backed commercial paper (ABCP) of eligible programs,
-And marketable securities issued by the U.S. Treasury.
The bank said the measures are needed to support the efficient functioning of financial markets, and it will continue to provide liquidity as long as required.
Wednesday, September 24, 2008
Tuesday, September 23, 2008
Financial Update
It's the only time in history that this has happenedIt’s the ONLY time in HISTORY this has happened!
Oil spikes US$25 a barrel on anxiety over U.S. bailout, short covering Oil prices briefly spiked more than US$25 a barrel Monday, shattering the record for the biggest one-day gain as unease about the government's $700 billion bailout plan pummeled the U.S. dollar and spurred investors to buy safe-haven assets. The rally came as energy traders grappled with the implications of the government's proposed initiative to stem the U.S. financial crisis by absorbing billions of dollars of banks' bad mortgage-related securities. U.S. congressional leaders endorsed the plan's main thrust, saying passage might occur in a matter of days. But they also want independent oversight, protections for homeowners and constraints on excessive executive compensation
· TSX -274.92pts Anxiety over the plan also sent stocks sharply lower; the credit markets were calmer than they were last week, but still showing the effects of investors' nervousness. Investors fear that the government will have to dramatically ramp up borrowing to pay for the mammoth rescue effort, an inflationary move that could further devalue the dollar and trigger another wave of safe-haven buying in investments like commodities.
· Dow -372.75pts
· Dollar +1.53c to $96.71US. They're going to have to continue auctioning off a whole lot of Treasurys to finance these projects, so the US dollar is going to suffer," said Matt Zeman, head trader at LaSalle Futures in Chicago. Clearly, financial markets decided today was the day to be spooked about the U.S. dollar and we’ve had a flight to other currencies as well as commodities," said Avery Shenfeld, senior economist at CIBC World Markets as the loonie hit a 7 week high. George Davis, chief technical strategist at RBC Capital Markets said the Canadian dollar has a 65 to 70% chance of rising above the U.S. dollar in the next 4 weeks
· Oil +16.37 to $120.92US per barrel There is still much uncertainty about what impact the U.S. rescue plan will have on energy demand. Oil's run-up near $150 a barrel in July and a weak U.S. economy has forced Americans to cut back on their driving and led business to scale down operations.
· Gold +43.30 to $903.90US per ounce Gold is benefiting from renewed interest as a haven from risk because jitters in the financial system spook investors
Where can you track potential interest rate movements?
You can track 30 day Banker’s Acceptance rates and watch the spread between Prime and 30 day BA's at http://www.bank-banque-canada.ca/en/rates/interest-look.html
If that spread narrows from the historical average of 170pts, then there is pressure on ARM rates to move. The other indicator, but harder to find, is swap rates. Below is a chart showing the past weeks spread narrowing daily from the desired 170 pts, indicating impending increases in ARM rates.
Prime rate
4.75
less Bankers Acceptance
Definition: banker's acceptance
A short-term credit investment created by a non-financial firm and guaranteed by a bank. Acceptances are traded at discounts from face value in the secondary market.
Bankers' acceptance are very similar to T-bills and are often used in money market funds.
Oil spikes US$25 a barrel on anxiety over U.S. bailout, short covering Oil prices briefly spiked more than US$25 a barrel Monday, shattering the record for the biggest one-day gain as unease about the government's $700 billion bailout plan pummeled the U.S. dollar and spurred investors to buy safe-haven assets. The rally came as energy traders grappled with the implications of the government's proposed initiative to stem the U.S. financial crisis by absorbing billions of dollars of banks' bad mortgage-related securities. U.S. congressional leaders endorsed the plan's main thrust, saying passage might occur in a matter of days. But they also want independent oversight, protections for homeowners and constraints on excessive executive compensation
· TSX -274.92pts Anxiety over the plan also sent stocks sharply lower; the credit markets were calmer than they were last week, but still showing the effects of investors' nervousness. Investors fear that the government will have to dramatically ramp up borrowing to pay for the mammoth rescue effort, an inflationary move that could further devalue the dollar and trigger another wave of safe-haven buying in investments like commodities.
· Dow -372.75pts
· Dollar +1.53c to $96.71US. They're going to have to continue auctioning off a whole lot of Treasurys to finance these projects, so the US dollar is going to suffer," said Matt Zeman, head trader at LaSalle Futures in Chicago. Clearly, financial markets decided today was the day to be spooked about the U.S. dollar and we’ve had a flight to other currencies as well as commodities," said Avery Shenfeld, senior economist at CIBC World Markets as the loonie hit a 7 week high. George Davis, chief technical strategist at RBC Capital Markets said the Canadian dollar has a 65 to 70% chance of rising above the U.S. dollar in the next 4 weeks
· Oil +16.37 to $120.92US per barrel There is still much uncertainty about what impact the U.S. rescue plan will have on energy demand. Oil's run-up near $150 a barrel in July and a weak U.S. economy has forced Americans to cut back on their driving and led business to scale down operations.
· Gold +43.30 to $903.90US per ounce Gold is benefiting from renewed interest as a haven from risk because jitters in the financial system spook investors
Where can you track potential interest rate movements?
You can track 30 day Banker’s Acceptance rates and watch the spread between Prime and 30 day BA's at http://www.bank-banque-canada.ca/en/rates/interest-look.html
If that spread narrows from the historical average of 170pts, then there is pressure on ARM rates to move. The other indicator, but harder to find, is swap rates. Below is a chart showing the past weeks spread narrowing daily from the desired 170 pts, indicating impending increases in ARM rates.
Prime rate
4.75
less Bankers Acceptance
Definition: banker's acceptance
A short-term credit investment created by a non-financial firm and guaranteed by a bank. Acceptances are traded at discounts from face value in the secondary market.
Bankers' acceptance are very similar to T-bills and are often used in money market funds.
Friday, September 12, 2008
Financial Update
· TSX +115.61pts as a bargain-hunting rally took hold in hard-hit resource shares.
· Dow +164.79pts
· Dollar -.59c to $92.89US.
· Oil -$1.71 to $100.87US per barrel
· Gold -$16.60to $741.30US per ounce marking its longest streak of losing sessions in eight years.
New home prices rise — but not by much
Jamie Sturgeon, Financial Post
Price increases on new homes eased for the sixth month in a row in July, increasing by a meagre 0.1% as the national market continues to soften, Statistics Canada reported on Thursday.
Contractors' selling prices were up 2.7% from July of last year but below the year-over-year rise of 3.5% seen between 2007 and 2006. The tapering off in the growth of home prices continues a two-year trend dating to September 2006, the federal agency said.
Slowing demand in Western Canada is leading the country-wide slowdown StatsCan said. The latest evidence came from Edmonton, where prices dipped by 5.3% on an annual basis in July - the sharpest drop in 23 years. In Calgary, prices declined 0.3% annualized - a 12-year low.
"Markets in these cities continue to adjust after experiencing record price increases in the last two and a half years," Statscan said.
Yet further east in booming Saskatchewan, prices grew by a sizable 29.6% in Regina, while Saskatoon saw an annual increase of 13.1%, as a result of higher material and labour costs.
In contrast, Vancouver saw prices tick up a modest 1.6% in July. Canada's largest city, Toronto, saw an increase of 3.7% while Montreal recorded a rise of 5.7%, StatsCan said.
"This is yet further evidence that the housing market in Canada continues to cool," said Charmaine Buskas, economic strategist with TD Securities in a research note
· Dow +164.79pts
· Dollar -.59c to $92.89US.
· Oil -$1.71 to $100.87US per barrel
· Gold -$16.60to $741.30US per ounce marking its longest streak of losing sessions in eight years.
New home prices rise — but not by much
Jamie Sturgeon, Financial Post
Price increases on new homes eased for the sixth month in a row in July, increasing by a meagre 0.1% as the national market continues to soften, Statistics Canada reported on Thursday.
Contractors' selling prices were up 2.7% from July of last year but below the year-over-year rise of 3.5% seen between 2007 and 2006. The tapering off in the growth of home prices continues a two-year trend dating to September 2006, the federal agency said.
Slowing demand in Western Canada is leading the country-wide slowdown StatsCan said. The latest evidence came from Edmonton, where prices dipped by 5.3% on an annual basis in July - the sharpest drop in 23 years. In Calgary, prices declined 0.3% annualized - a 12-year low.
"Markets in these cities continue to adjust after experiencing record price increases in the last two and a half years," Statscan said.
Yet further east in booming Saskatchewan, prices grew by a sizable 29.6% in Regina, while Saskatoon saw an annual increase of 13.1%, as a result of higher material and labour costs.
In contrast, Vancouver saw prices tick up a modest 1.6% in July. Canada's largest city, Toronto, saw an increase of 3.7% while Montreal recorded a rise of 5.7%, StatsCan said.
"This is yet further evidence that the housing market in Canada continues to cool," said Charmaine Buskas, economic strategist with TD Securities in a research note
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