Monday, March 18, 2013

Mortgage Commentary March 18, 2013

As at close of markets Friday

TSX +30.12 to 12,830.03(CP) helped by energy and mining stocks. The Canadian Real Estate Association reported that home and condo resales fell 2.1 per cent in February from the previous month. On a year-over-year basis, last month's activity was down 15.8 per cent.

DOW -25.03 to 14,514.11 After eight record high sessions and 10 consecutive days of gains, the Dow industrials gave back some of that on mixed economic data. A spike in gasoline prices drove up expenses in February. The Labour Department says consumer prices increased a seasonally adjusted 0.7 per cent last month from January, the biggest rise since June 2009. In European economic developments, a summit of the 27 European Union leaders in Brussels failed to deliver any fundamental change in economic strategy though there was more talk of the need to promote growth rather than just cut debt.

Dollar +.29c to 98.11cUS

Oil +$.42 to $93.45US

Gold +$1.90 to $1,592.60 The concern about inflation pushed gold prices higher

Canadian 5 year bond yields markets -.05 to 1.36The spread (obtained by subtracting the bond yield above from the NEW industry average 5 yr rate published mortgage rate of 3.19) is now far below the desired profit range at 1.83 . If the increase in bond yield continues upward, the spread shrinks, which could prompt interest rates to rise. The range for investor desired profitability is currently in the region of 1.90 and 2.10
http://www.marketwatch.com/investing/bond/tmbmkca-05y?countryCode=bx


Canadians' household net worth hit a record high in the fourth quarter of 2012, driven by higher home prices and stabilizing debt loads, which economists say is a sign of "financial maturing."

The market value of Canadian household net worth rose by 1.4 per cent or $93 billion to $7 trillion, according to an RBC Economics analysis of the latest Statistics Canada data released Friday.

"This represents the highest level of aggregate net worth on record," said RBC economist Laura Cooper.

Cooper noted the gain in net worth reflected the $108 billion increase in household assets values (rising to $8.7 trillion), partially offset by the $14 billion increase (to $1.7 trillion) in household liabilities.
 Per capita household net worth was $199,700 in the quarter, which was up from $197,400 in the previous quarter, also an all-time high, Cooper said.  While Canadians' debt-to-income ratio stayed at a record 165 per cent in the fourth quarter, and household debt grew by 5.5 per cent in the October-to-December period, it was the slowest pace recorded since 2002.  "House prices didn't fall, financial markets went up and borrowing is slowing. It shows some financial maturing by many Canadians," said Benjamin Tal, Deputy Chief Economist of CIBC World Markets Inc.  The level of household debt remains a concern in Canada, but TD economist Jonathan Bendiner noted growth has moderated over the last few quarters, which he noted is "encouraging and underscores the Bank of Canada's view that households are exercising more restraint."  Overall national net worth – which includes households, government and investments – increased by 1 per cent to $6.9 trillion in the fourth quarter, to reach $195,900 on a per capita basis, StatsCan also said on Friday.  "Higher prices for many assets led the advance," StatsCan said in its report. "The decrease in Canada's net foreign indebtedness also contributed to the gains in national net worth."  The corporate sector led the savings trend, a trend Bank of Canada Governor Mark Carney has previously referred to as "dead money" as companies worry about investing in today's volatile economy.



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