Thursday, March 7, 2013

Mortgage Commentary March 7, 2013

As at close of markets Wednesday

TSX +95.93 to 12,831.96(CP)

DOW +42.47 to 14,296.24 Positive employment data helped push the Dow Jones industrial average to a fresh, record high for a second day — its highest level since early October 2007. Payroll firm ADP said the private sector created 198,000 jobs last month. Also the central bank's so-called Beige Book said the U.S. economy expanded in all parts of the country in January and February, helped by strong auto sales, a continued recovery in housing and improved job prospects.

Dollar -.33c to 96.96c US after the Bank of Canada kept its key rate unchanged at one per cent and indicated that persistent economic weakness and low inflation means a hike is a long ways off.

Oil -$.39 to $90.43US after the U.S. Energy Information Administration reported that crude supplies climbed by 3.8 million barrels last week, much higher than the 1.1 million-barrel climb that analysts expected.

Gold +$0 to $1,574.90

Canadian 5 year bond yields markets -.01 to 1.30The spread (obtained by subtracting the bond yield above from the industry average 5 yr rate published mortgage rate of 3.24) is now centred in the desired profit range at 1.94 . 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

Bank of Canada softens stance, but rate hike still on horizonGordon Isfeld | Financial Post 13/03/06
OTTAWA — After months of staring down increasingly threatening economic data here and abroad, the Bank of Canada appears to have blinked — ever so slightly.

The central bank on Wednesday did what it has done for two-and-a-half-years, leaving its near-rock-bottom interest rate unturned.

But the wording behind the decision — keeping its trendsetting lending level at 1% — has been softened somewhat.

The bank, which has left its key rate at the same level since September 2010, also highlighted concerns over continued slack in the economy and pointed to a longer extension of that holding pattern.

I don't think anybody is going to be taken by surprise by what they are saying. I think most believe that the bank is going nowhere for a long period of time," said Douglas Porter, chief economist at BMO Capital Market.

"But to have the bank actually spell it out so explicitly was a little bit of a surprise," he said. "They've been a little bit stronger in their language than most had expected. But it's hardly a shock."

In their statement, policymakers said that given the "continued slack in the Canadian economy, the muted outlook for inflation, and the more constructive evolution of imbalances in the household sector, the considerable monetary stimulus currently place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required."

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