First National Financial LP

Find out about rates and curves, February’s employment numbers and this week’s BoC announcement here

  • Neil Silverberg, Senior Analyst, Capital Markets

This week in things that happened that you don’t really need to know: an ETF named “FOMO” was filed with the SEC. FOMO for those who are lucky enough not to already know, stands for “Fear of missing out” and the ETF will seek to maximize shareholder returns by investing in SPACs, IPO’s and leveraged ETF’s. Basically, the hottest capital market trends over the last year. The only thing missing is a bitcoin and Toronto housing component (note: these are not suggestions).

Now for the items that you should know:

Rates and Curves

Rates continue to whipsaw around trying to find some stability in the market.

My last note was published on the morning of February 26th and right after hitting the publish button we saw 5-year Government of Canada yields quickly move lower, dropping from 1.11 to 0.86 in the span of three trading days. We are currently back up to 0.98 with a large 5 basis point move up occurring overnight.

Over to the credit curve, the 5-year Canada Mortgage Bond (“CMB”) is up 8 basis points from March 1st and currently sits at 1.24. The good news, however, is that spreads remain tight at 25 basis points above the Government of Canada benchmark bond reinforcing the narrative that there is still strong demand for 5-year credit products.

The 10-year CMB is up 18 basis points from March 1st, currently yielding 1.88, however, the spread remains at wider levels trading around 37.5 basis points above the respective Government of Canada benchmark.

Next week, we expect Canada Housing Trust (“CHT”) to launch their 5-year CMB deal ranging between $5 and $5.5 billion. This 5-year issuance will feature a new June 2026 maturity date. Although CMB trading volumes have been lighter leading up to this new issuance, we are hopeful that it will be better received than the February 10-year deal that caused spreads to widen out by 6 basis points.

What does this mean for you?

A strong 5-year issuance with solid domestic and international investor demand would help continue to push credit spreads in and potentially lead to lower all-in coupons.

Furthermore, the relentless market volatility and climbing yields that we have been seeing can be an unwanted headache as you move towards a closing. The excellent treasury team here at First National works closely with your sales advisors to help come up with risk mitigation strategies that we would be happy to share.


Some encouraging news released this morning as Canada’s labour market added 259k positions in February moving the unemployment rate back down from 9.4% in January to 8.2%. These results blow past the estimated 75k gain that was expected. Employment gains were primarily in part-time work with 190k coming from the food services and retail sectors. These two sectors were the hardest hit from job losses in the last few months as most of Canada headed into the second shutdown. The quick turnaround in job gains is similar to the first wave when employment rebounded faster than expected.

Bank of Canada Rate Announcement

The Bank of Canada (“BoC”) rate announcement that took place on Wednesday came and went with few surprises which was the BoC’s objective. There is a great wrap up here if you would like in-depth details but to summarize:

In addition to maintaining the benchmark overnight interest rate at 0.25%, the BoC slightly adjusted their language and tone in order to remain as flexible as possible moving forward with regards to both reducing bond purchases (tapering) and potential future rate hikes.

The market reaction was tame with 5-year yields moving down about 2 basis points throughout the rest of the day. The market continues to price in interest-rate increases towards the end of 2022 creating a bit of a mismatch between the market and the 2023 date that the BoC forecasted back in January.

The key takeaway here is that all eyes will be on the April meeting when the Bank of Canada will be updating their projections and release a full Monetary Policy Report which will provide better guidance on the timing of their next moves. With the strong unemployment numbers from this morning, the likelihood of a shift or reduction in bond purchases in April became substantially higher.

Final Note

Bond guys and doom and gloom often go hand in hand, and I am not sure what is gloomier than losing an hour of sleep on a Sunday….so on that note, don’t forget to move your clocks forward this weekend!  

Thanks for reading and have a good weekend.