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Fragility to stay as bank keeps rates at historic lows

December 16th, 2009 No comments

OTTAWA–Citing weaker-than-expected growth in the July-to-September period, the Bank of Canada on Tuesday left its overnight rate unchanged at 0.25 per cent.

In the wake of that announcement, TD Bank said Canada’s recovery is so fragile; the central bank’s Governor Mark Carney will have to hold the overnight rate at an all-time low until late next year.

That’s several months longer than Carney has previously said the bank would wait to help stimulate business activity.

TD Bank said current trends indicate a return to full economic output will be delayed until the April-through-June period of 2012, six months later than the central bank is predicting.

“As such, we believe that the Bank of Canada will stay put past its conditional commitment of June 2010, and the first rate hike will not come until the fourth quarter of next year,” said Diana Petramala, a TD Bank economist.

Canada emerged from the recession but only just barely, with growth of 0.4 per cent in the July-through-September period. That was considerably less than the central bank’s 2 per cent growth prediction.

Looking ahead, “the main risks are a more protracted global recovery and persistent strength in the Canadian dollar that could act as a significant further drag on growth,” Carney stated.

The next scheduled date for announcing the bank’s overnight rate target is Jan.19.

For more information on bank rates please contact Charmaine

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Bond Yields Up Big

December 8th, 2009 No comments

Bond yields usually rise on good economic news and last week was no different. The 5-year bond yield jumped 0.14% on strong jobs data from both sides of the border.  (Canadian Jobs Report / U.S. Jobs Report)
Canada added 79,100 jobs in November. Traders had expected only 15,000.

With rebounding yields, fixed mortgage rates will probably halt their drop, at least for the time being.  As of now, discounted 5-year fixed rates are just under 4%—well below the approximate 10-year average of 5.36%.
The 5-year yield, which influences fixed mortgage rates, now stands at 2.53%.  It seems to be putting in a floor in the 2.35% to 2.40% range.  It may be tough to penetrate that floor in the near-term without weaker economic news, or some other economic shock.
The Bank of Canada holds its last interest rate meeting of the year on Tuesday. 19 of 19 economists polled by Bloomberg predict no change to the Bank’s 0.25% overnight rate.

Nevertheless, analysts will be watching to see if the BoC surprises the bond market with any optimistic outlooks.
For more market information contact Charmaine

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US Housing Prices May Fall Further

October 29th, 2009 No comments

* TSX -248.21 to 10,805(Reuters) every stock market in the world was down yesterday on doubts about the strength of the US economic recovery. TSX closed to its lowest level in 2 months dipping below the 11,000 pt mark

* DOW -119.48 to 9,762 dipped below 10,000 pts as sales of new US homes fell 3.6% last mth against an expected 2.6% rise

* Dollar -1.08c to 92.72 fell to its lowest level in 3 weeks influenced by a dip in oil prices

* Oil -$2.09 to $77.46US per barrel.

* Gold -$4.80 to $1,034.70USD per ounce

* Canadian 5 yr bond yields -.03bps to 2.70. four weeks ago the yield was 2.57%.  This is the rate that effects the fixed interest rates

* http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

Article from US Mortgage Brokers Association

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