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Canadian bond yields took one other step down right now following the discharge of lower-than-expected inflation information south of the border.
The U.S. Division of Labor reported that decrease fuel costs helped cool inflation to a fee of +3.2% in October, down from 3.7% in September. Core inflation, which excludes unstable meals and power costs, eased barely to 4% from 4.1% beforehand.
The info was sufficient to trigger markets on each side of the border to solidify expectations that fee hikes are actually performed and that previous fee hikes will probably be sufficient to deliver inflation in each international locations again all the way down to 2%.
“Markets are pricing no additional hikes and a good shot at a Fed fee lower by March twentieth,” famous Scotiabank’s Derek Holt. He added that 100 foundation factors, or one proportion level, of fee cuts by the Federal Reserve are additionally now priced by the top of the yr.
“My bias is that it’s going to take much more than this report back to inspire cuts that early…however we’ll see with extra time and extra information,” Holt writes.
Regardless, Canadian bond markets responded by staging a worth rally, which resulted in yields falling to four-month lows (bond costs and yields transfer inversely to 1 one other). The Authorities of Canada 5-year yield is now down practically 60 bps from its latest excessive reached in early October.
On condition that fastened mortgage charges usually observe bond yields, additional fee cuts may very well be anticipated within the coming weeks.
However as we’ve reported beforehand, mortgage suppliers haven’t been reducing charges in lockstep with bond yield decreases, largely as a result of danger premiums which can be nonetheless being priced in.
Ryan Sims, a TMG The Mortgage Group dealer and former funding banker, says that’s not more likely to change.
“Whereas 5-year bond yields have been down, evidently the mortgage charges are staying elusively excessive,” he wrote in a word to subscribers.
“As predicted again a couple of months in the past, lenders are padding their backside line, and rising unfold to account for financial danger,” he added. “Yield drops are usually not copying over bp for bp. This may proceed. You possibly can bounce for pleasure at a 100-bps 5-year bond [yield] drop, however it most likely solely interprets into 50 bps on the mortgage fee.”
Canadian inflation information for October will probably be launched on November 21.
BoC survey exhibits lending situations easing for households
Canadian households reported an enchancment in mortgage lending situations for the primary time this yr, in keeping with the Financial institution of Canada’s third-quarter Senior Mortgage Officer Survey.
The advance was a results of the Financial institution of Canada shifting to the sidelines after elevating charges in July, mentioned BMO economist Shelly Kaushik. She added that the easing was pushed by pricing measures “as non-price situations have been nonetheless tightening on web.”
“Nonetheless, tighter lending situations for companies sign ongoing weak spot in exercise from the cumulative impression of earlier coverage tightening,” she added. Extra lenders reported tighter situations within the quarter, marking the very best share since mid-2020.
GTA condominium gross sales attain 20-year low in Q3
New condominium gross sales within the Higher Toronto Space (GTA) totalled 2,664 items within the third quarter, a close to 20-year low, in keeping with Urbanation Inc., which launched the information in its Condominium Market Survey.
Whereas the Q3 gross sales are up 41% from final yr, Urbanation notes that presale exercise “successfully floor to a halt” a yr in the past.
“Elevated rates of interest and heightened market uncertainty continued to grip the brand new condominium sector within the GTA,” the report reads. “Whereas some new launches with aggressive worth factors have seen success, many initiatives have been unable to make an financial case for continuing within the present market, inflicting extra provide to be placed on maintain.”
Common condominium costs launched for presale in Q3 have fallen to $1,216 per sq. foot, an 18% decline in comparison with the record-high of $1,485 per sq. ft. recorded a yr earlier.
“Common sale costs decreased as patrons and builders targeted extra of their exercise on decrease priced places primarily within the 905 Area, which represented greater than half (54%) of complete Q3-2023 gross sales,” the report famous.
CMHC launches seek for new CEO
Canada’s housing company, the Canada Mortgage and Housing Company (CMHC), has introduced that the search is now underway to discover a new president and CEO.
In a launch, the Authorities of Canada mentioned it’s encouraging purposes from “certified, numerous, and proficient people” by its December 11 deadline.
“This course of encourages purposes from people with a robust data of housing and monetary markets, each domestically and internationally, and their position in macroeconomic coverage,” the discharge says. “Sturdy data of CMHC’s housing coverage and legislative mandate, and of the Authorities’s social, financial, and financial insurance policies and priorities associated to housing can be an asset.”
The publish of president and CEO has been left vacant with the deliberate departure of present chief govt Romy Bowers, who’s scheduled to depart her publish in December after lower than three years within the place.
Bowers, who beforehand served as CMHC’s chief danger officer, will probably be taking over a brand new place on the Worldwide Financial Fund as director of the Workplace of Threat Administration.
Canadians’ view on private funds reaches new low
Shopper confidence continued to fall this week, whereas Canadians’ view on their private funds reached a low final seen through the pandemic.
The Bloomberg Nanos Canadian Confidence Index (BNCCI) fell to 48.68, down barely from final week and from a excessive of 53.12 in June. A rating under 50 signifies a web unfavourable financial outlook by Canadians. The common for the index since 2008 is 55.54.
In the meantime, Canadians’ sentiment on their private funds fell to 12.74 from 13.04 final week and 14.84 4 weeks in the past.
“Optimistic views on private funds haven’t hit a degree this low, numerically, because the interval close to the start of the pandemic earlier than authorities helps totally kicked in,” chief information scientist Nik Nanos mentioned in an announcement. “Ahead-looking expectations are on the decline.”
Shoppers’ outlook on actual property rose barely this week to 37.47 from 37.18 final week. Nonetheless, it stays down from 42.98 4 weeks in the past. Sentiment on job safety can also be down from final week.
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