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Market Commentary: An overview of credit spreads, interest rates and key announcements.

  • Jason Ellis, President and Chief Executive Officer

Ahoy there.

It’s been a long time since I last deigned to post under the pseudonym of Treasury Guy, but we held our First National town hall meetings in Toronto and Montreal this week and I guess it put me in a Chatty Cathy kind of mood.  The fact that about a dozen central banks hiked rates around the world this week also gave me a good excuse to dust off the old keyboard.  I am going to keep it brief though…I don’t want to pull a muscle and I already smell toast burning…which can’t be a good sign.

Anyway, if we’re going to talk about central banks, we must start with our own.  The BoC didn’t have a meeting this week, but deputy governor Paul Beaudry did speak at the University of Waterloo and was crystal clear.  Rates are going up until inflation comes down.  It’s basically a “damn the torpedoes” kind of thig.  As you know, they last met on September 7th and increased the overnight rate by 75 bps to 3.25% (now up 3.00% since February).  The next BoC meeting is October 26th, and the market is pricing in a 50 bp hike.    

As for our US cousins, the Fed met on Wednesday.  The market was leaning toward 75 bps and got it…and a lot of tough talk about more to come.  The Fed Funds upper bound is now at 3.25% (also up 3.00% so far this year).  The Fed next meets on November 2nd.  

Interest rates and credit spreads:

The curve is officially inverted.  2-5-10-30 year GoC bonds are currently yielding 3.80%-3.35%-3.10%-3.00%.  What does this mean?  Historically an inverted yield curve has been an indicator of a pending economic recession…but not always.  But probably.  Maybe.  Of course, there’s always the chance of a ‘soft landing’ where inflation moderates without a sustained economic contraction.  Fingers crossed.

Credit spreads…another indicator of market sentiment around risk and volatility, remain elevated.  One of the best aggregate indicators of credit spreads is the CDX Investment Grade Index that tracks 125 equally weighted credit default swaps on North American investment grade entities across multiple sectors.  The index currently stands at 98.  For context, the 52 week high is 102 (June) and the low is 49 (back in December).  In March 2020 it peaked at 151.  For clarity, higher is worse than lower.  Here in Canada specifically, 5 year term senior bank ‘bail-in’ debt is trading around GoC+150 compared to about GoC+75 last year.  This is affecting bank cost of funds and we can see that seeping into the consumer rates market…including residential mortgages.

Random musings:

As much I love the Fall, it does sadden me to remind you that yesterday was the Autumnal Equinox…the start of Fall and our descent into darkness.  Winter is coming.  But don’t get too down in the mouth.  This week also featured international Talk like a Pirate Day…which is fun…and a good way to annoy your friend and colleagues.  Savvy?  

That’s it for now so get out there and have a great weekend you scurvy dogs,

I remain,

Treasury Guy  


Market Commentary: An overview of credit spreads, interest rates and key announcements.

  • Jason Ellis, President and Chief Executive Officer

Ahoy there.

It’s been a long time since I last deigned to post under the pseudonym of Treasury Guy, but we held our First National town hall meetings in Toronto and Montreal this week and I guess it put me in a Chatty Cathy kind of mood.  The fact that about a dozen central banks hiked rates around the world this week also gave me a good excuse to dust off the old keyboard.  I am going to keep it brief though…I don’t want to pull a muscle and I already smell toast burning…which can’t be a good sign.

Anyway, if we’re going to talk about central banks, we must start with our own.  The BoC didn’t have a meeting this week, but deputy governor Paul Beaudry did speak at the University of Waterloo and was crystal clear.  Rates are going up until inflation comes down.  It’s basically a “damn the torpedoes” kind of thig.  As you know, they last met on September 7th and increased the overnight rate by 75 bps to 3.25% (now up 3.00% since February).  The next BoC meeting is October 26th, and the market is pricing in a 50 bp hike.    

As for our US cousins, the Fed met on Wednesday.  The market was leaning toward 75 bps and got it…and a lot of tough talk about more to come.  The Fed Funds upper bound is now at 3.25% (also up 3.00% so far this year).  The Fed next meets on November 2nd.  

Interest rates and credit spreads:

The curve is officially inverted.  2-5-10-30 year GoC bonds are currently yielding 3.80%-3.35%-3.10%-3.00%.  What does this mean?  Historically an inverted yield curve has been an indicator of a pending economic recession…but not always.  But probably.  Maybe.  Of course, there’s always the chance of a ‘soft landing’ where inflation moderates without a sustained economic contraction.  Fingers crossed.

Credit spreads…another indicator of market sentiment around risk and volatility, remain elevated.  One of the best aggregate indicators of credit spreads is the CDX Investment Grade Index that tracks 125 equally weighted credit default swaps on North American investment grade entities across multiple sectors.  The index currently stands at 98.  For context, the 52 week high is 102 (June) and the low is 49 (back in December).  In March 2020 it peaked at 151.  For clarity, higher is worse than lower.  Here in Canada specifically, 5 year term senior bank ‘bail-in’ debt is trading around GoC+150 compared to about GoC+75 last year.  This is affecting bank cost of funds and we can see that seeping into the consumer rates market…including residential mortgages.

Random musings:

As much I love the Fall, it does sadden me to remind you that yesterday was the Autumnal Equinox…the start of Fall and our descent into darkness.  Winter is coming.  But don’t get too down in the mouth.  This week also featured international Talk like a Pirate Day…which is fun…and a good way to annoy your friend and colleagues.  Savvy?  

That’s it for now so get out there and have a great weekend you scurvy dogs,

I remain,

Treasury Guy  


Market Commentary: An overview of credit spreads, interest rates and key announcements.

  • Jason Ellis, President and Chief Executive Officer

Ahoy there.

It’s been a long time since I last deigned to post under the pseudonym of Treasury Guy, but we held our First National town hall meetings in Toronto and Montreal this week and I guess it put me in a Chatty Cathy kind of mood.  The fact that about a dozen central banks hiked rates around the world this week also gave me a good excuse to dust off the old keyboard.  I am going to keep it brief though…I don’t want to pull a muscle and I already smell toast burning…which can’t be a good sign.

Anyway, if we’re going to talk about central banks, we must start with our own.  The BoC didn’t have a meeting this week, but deputy governor Paul Beaudry did speak at the University of Waterloo and was crystal clear.  Rates are going up until inflation comes down.  It’s basically a “damn the torpedoes” kind of thig.  As you know, they last met on September 7th and increased the overnight rate by 75 bps to 3.25% (now up 3.00% since February).  The next BoC meeting is October 26th, and the market is pricing in a 50 bp hike.    

As for our US cousins, the Fed met on Wednesday.  The market was leaning toward 75 bps and got it…and a lot of tough talk about more to come.  The Fed Funds upper bound is now at 3.25% (also up 3.00% so far this year).  The Fed next meets on November 2nd.  

Interest rates and credit spreads:

The curve is officially inverted.  2-5-10-30 year GoC bonds are currently yielding 3.80%-3.35%-3.10%-3.00%.  What does this mean?  Historically an inverted yield curve has been an indicator of a pending economic recession…but not always.  But probably.  Maybe.  Of course, there’s always the chance of a ‘soft landing’ where inflation moderates without a sustained economic contraction.  Fingers crossed.

Credit spreads…another indicator of market sentiment around risk and volatility, remain elevated.  One of the best aggregate indicators of credit spreads is the CDX Investment Grade Index that tracks 125 equally weighted credit default swaps on North American investment grade entities across multiple sectors.  The index currently stands at 98.  For context, the 52 week high is 102 (June) and the low is 49 (back in December).  In March 2020 it peaked at 151.  For clarity, higher is worse than lower.  Here in Canada specifically, 5 year term senior bank ‘bail-in’ debt is trading around GoC+150 compared to about GoC+75 last year.  This is affecting bank cost of funds and we can see that seeping into the consumer rates market…including residential mortgages.

Random musings:

As much I love the Fall, it does sadden me to remind you that yesterday was the Autumnal Equinox…the start of Fall and our descent into darkness.  Winter is coming.  But don’t get too down in the mouth.  This week also featured international Talk like a Pirate Day…which is fun…and a good way to annoy your friend and colleagues.  Savvy?  

That’s it for now so get out there and have a great weekend you scurvy dogs,

I remain,

Treasury Guy  


Market Commentary: An overview of credit spreads, interest rates and key announcements.

  • Jason Ellis, President and Chief Executive Officer

Ahoy there.

It’s been a long time since I last deigned to post under the pseudonym of Treasury Guy, but we held our First National town hall meetings in Toronto and Montreal this week and I guess it put me in a Chatty Cathy kind of mood.  The fact that about a dozen central banks hiked rates around the world this week also gave me a good excuse to dust off the old keyboard.  I am going to keep it brief though…I don’t want to pull a muscle and I already smell toast burning…which can’t be a good sign.

Anyway, if we’re going to talk about central banks, we must start with our own.  The BoC didn’t have a meeting this week, but deputy governor Paul Beaudry did speak at the University of Waterloo and was crystal clear.  Rates are going up until inflation comes down.  It’s basically a “damn the torpedoes” kind of thig.  As you know, they last met on September 7th and increased the overnight rate by 75 bps to 3.25% (now up 3.00% since February).  The next BoC meeting is October 26th, and the market is pricing in a 50 bp hike.    

As for our US cousins, the Fed met on Wednesday.  The market was leaning toward 75 bps and got it…and a lot of tough talk about more to come.  The Fed Funds upper bound is now at 3.25% (also up 3.00% so far this year).  The Fed next meets on November 2nd.  

Interest rates and credit spreads:

The curve is officially inverted.  2-5-10-30 year GoC bonds are currently yielding 3.80%-3.35%-3.10%-3.00%.  What does this mean?  Historically an inverted yield curve has been an indicator of a pending economic recession…but not always.  But probably.  Maybe.  Of course, there’s always the chance of a ‘soft landing’ where inflation moderates without a sustained economic contraction.  Fingers crossed.

Credit spreads…another indicator of market sentiment around risk and volatility, remain elevated.  One of the best aggregate indicators of credit spreads is the CDX Investment Grade Index that tracks 125 equally weighted credit default swaps on North American investment grade entities across multiple sectors.  The index currently stands at 98.  For context, the 52 week high is 102 (June) and the low is 49 (back in December).  In March 2020 it peaked at 151.  For clarity, higher is worse than lower.  Here in Canada specifically, 5 year term senior bank ‘bail-in’ debt is trading around GoC+150 compared to about GoC+75 last year.  This is affecting bank cost of funds and we can see that seeping into the consumer rates market…including residential mortgages.

Random musings:

As much I love the Fall, it does sadden me to remind you that yesterday was the Autumnal Equinox…the start of Fall and our descent into darkness.  Winter is coming.  But don’t get too down in the mouth.  This week also featured international Talk like a Pirate Day…which is fun…and a good way to annoy your friend and colleagues.  Savvy?  

That’s it for now so get out there and have a great weekend you scurvy dogs,

I remain,

Treasury Guy  


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