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Market Commentary

June 13, 2014

CMHC announced the launch of the June 5 year CMB issue on Thursday for pricing on Friday June 13th.  As expected, the issue will be a re-opening of the June 2019 maturity date.  The issue size is $5 billion, consistent with the last several 5 year deals.  Indicative Seller allocations are approximately $225 million, down from $280 million last quarter reflecting greater participation by smaller lenders, likely driven by seasonally higher origination volumes.  Expected pricing is in the context of the market at GoC March 19’s +32bps.  That spread is virtually unchanged from when the issue originally launched in March at +31.5bps.  Dealers are reporting that books are full and that the deal should be well received.   The next 5yr CMB issue is expected in September, and will likely see the launch of a new December 2019 maturity date with an initial term of 63 months.   Based on the prevailing yield and credit curves, the new December maturity date should trade about 12bps higher than the outgoing June bond.


by First National Financial LP 13. June 2014 05:40

May 7, 2014

Today marks the start of three looks at the Canada's housing industry.  The report of note shows the value of building permits issued by municipalities dropped 3.0% in March, missing expectations for a 4.3% increase.

While permits for residential construction rose that was more than offset by a decline in non-residential permits.

Residential permits gained 1.0% with a 7.9% increase for multi-family units.  Both numbers are turnarounds from significant declines in February.  Permits for single-family dwellings dropped 3.6% in March, the fourth decline in five months.

Reports on housing starts and new home prices come out tomorrow.

North American markets were mixed in early trading.

Bond yields are flat to +1 bps.


by First National Financial LP 7. May 2014 05:42

May 6, 2014

A couple of looks at the broader economy in North America today:

Canada's international trade managed to eke out a surplus in March.  It stands at $8 million, on a significant decline in exports.  Notably, exports to the U.S. dropped 2.5%.  However, February's numbers were revised upward to show a major $850 million increase rather than the previously reported $290 million.

The U.S. saw its international trade deficit narrow 3.6% in March as exports rose and imports declined.  Canada and South Korea were America's biggest customers.  Despite the shipments into this country the U.S. trade deficit with Canada rose 3.7%.

North American markets were all lower in early trading.

Bond yields are up 2 - 3 bps.


by First National Financial LP 6. May 2014 05:44

April 30, 2014

A busy day for data with the major reports being GDP in Canada and the U.S.

Canadian GDP clocked in with modest 0.2% increase in February over January.  Oil and gas and mining led the gains.  Year-over-year Canadian GDP is up 2.6% for February, the same as January and just a little better than expectations.

Growth in the U.S. economy bearly registered in the first quarter, increasing just 0.1%.  That's well short of expectations and well off the 2.6% growth registered in Q4 of 2013.  Both business investment and residential home construction fell.  Projections call for a better Q2 as hiring and consumer and business spending increase.

Payroll processor ADP says private employers in the U.S. added 220,000 jobs in April, beating expectations.  March figures were revised upwards.

The U.S. Fed's FOMC wraps up its monthly meeting today.  Bank of Canada Governor Stephen Poloz continues his parliamentary testimony.

North American markets were all lower in early trading.

Bond yields are down 1 - 3 bps.


by First National Financial LP 30. April 2014 06:57

April 29, 2014

Today's key report comes out of the United States.  The Case-Shiller home price index rose by a modest 0.8% in February compared to January, just slightly better than expectations.  Compared to a year ago, the 20 city index shows a 12.9% increase.   That is slightly less than expected and indicates a slowdown in price acceleration.

The monthly meeting of the U.S. Fed's Federal Open Market Committee is underway today.

North American markets were all higher in early trading.  Investors appear to be taking heart in a string of better than expected corporate earnings.

Bond yields are up 3 – 5 bps.


by First National Financial LP 29. April 2014 06:30

April 28, 2014

Just one report of note on the calendar today, the National Association of Realtors index of pending home sales in the U.S.  The NAR says the index climbed 3.4 points, to 97.4 in March.  The increase was more than triple expectations and is the first gain in nine months.

The rest of the week will fill out with some significant data including GDP in both Canada and the States.  Bank of Canada Governor Stephen Poloz will be making his semi-annual report to Parliament on Tuesday.

We'll also get reads on the American labour market, U.S. home prices and construction spending, and the latest word from the Federal Reserve.  Observers will be looking for what, if any, comments the Fed has on the slow down in the U.S. housing market.

North American markets were mixed in early trading.

Bond yields are up 1 bps.


by First National Financial LP 28. April 2014 05:46

April 25, 2014

It's a quiet day for data to end the week.  The only report of note is the final read on U.S. consumer sentiment for April.  The University of Michigan index rose to a nine month high on surging, near-term optimism.  The index came in at 84.1, up more than four points from March.

Bank of Canada governor Stephen Poloz Canadians can look forward to relatively low interest rates for sometime to come -- maybe even years.  The bank boss says even when the economy is back to firing on all cylinders it's unlikely interest rates will have to shoot up to keep inflation in check.

Poloz expects the economy will be back in shape some time in 2016.  He also expects modest rate increases will be adequate to fight inflation because of the super-low interest environment of the last several years.

North American markets were all lower at the outset.  Concerns about the situation in Ukraine appear to be weighing on traders.

Bond yields are unchanged to -4  bps.


by First National Financial LP 25. April 2014 04:31

April 24, 2014

Durable goods orders in the U.S. were up 2.6% in March.  That adds to the 2.1% gain in February following two consecutive months of declines.

Demand for so-called core capital goods, which is seen as a proxy for business spending plans, rose 2.1% in March.

A glance at the U.S. job market shows first time claims for jobless benefits jumped a surprising 24,000 last week.  The four week rolling average -- a less volatile measure -- shows an increase of 4,750.  

The spike is being blamed on problems adjusting the data for seasonal variations and the Easter holiday rather than any fundamental collapse in labour market conditions.

North American markets were generally higher in the early going.  The Dow was down.

Bond yields are up 2 - 3 bps.


by First National Financial LP 24. April 2014 08:45

April 23, 2014

Canadian retails sales shook off some of their winter blahs in February rising 0.5% compared to January.  While welcome, the increase wasn't quite enough to make-up for December's freeze-up.  Gains were posted in 7 of 11 sectors and volumes were up a modest 0.1%.

In the U.S., new home sales dropped 14.5% in March coming in well below the forecast for a modest gain.  The long, cold winter continues to take some of the blame but higher prices, increasing mortgage rates and a shortage of supply are also significant factors.  Year-over-year sales of new, single family homes were down 13.3%.

North American markets were mixed in early trading.  The TSX was up while Wall Street was down.

Bond yields are down 3 bps.


by First National Financial LP 23. April 2014 08:45

April 22, 2014

Canadian wholesale trade popped up 1.1% in February beating forecasts for a 0.7% increase. The gain was driven by the auto sector. Excluding cars and parts sales were up 0.8% as were volumes. Year-over-year wholesalers gained 3.5%.

In the U.S., the federal government's read on home prices showed a slightly better than expected increase in February, rising 0.6% over January. Compared to a year earlier U.S. home prices are up 6.9%.

Sales of existing homes in the U.S. slipped 0.2% in March according to the National Association of Realtors. The decline was not as big as forecast but marks an 18 month low. Year-over-year sales in the U.S. are down 7.5%.

North American markets were higher in early trading.

Bond yields are up 1 bps.


by First National Financial LP 22. April 2014 09:17