Find out here the results of the latest Business Outlook Survey

  • Andrew Masliwec, Analyst, Capital Markets

Greetings Mortgage people,

The marketing team was on the 7th floor this morning which can only mean one thing: someone needs to get them commentary. STAT. I didn’t even realize it was Friday. Time flies when you are having fun. It’s that or I am overly stressed about the Leafs start to the season. Where are the big guys? Do we need a new back up goalie? Will our top pairing D figure it out? Why am I still wearing Babsocks? Should I stop planning the parade? Stressful.

“I Voted”

The big news this past week was of course the Canadian federal election. After a short but also what seemed like forever campaign, the Liberal Party was able to stay in power. Albeit, this time in a minority government. Overall, the markets typically react to surprises and many predicted a Liberal minority, so the rates and equity markets remained status quo.  Going forward, key market issues will be focused around what happens with the Trans Mountain Pipeline, housing affordability and carbon taxation. Personally, I am most excited for a reduction of my cell phone bill. You would think 8 gigs of data would be enough to scroll through Instagram, Twitter and Bloomberg for 12 hours a day, but it’s unfortunately not.

Economic News

On the economic news front, we had retail sales data come in on Tuesday. The retail sales for August came in lower than expected at -0.1% (they contracted), missing the expected gain of 0.4%. The ex-automobile number came in at -0.2% vs the 0.0% expected. I’m not an economist but looking at the autos/ex-autos numbers tells us one thing: car sales were not as strong as expected. I blame millennials and their propensity to live close to work and/or nightlife. Included in the decrease, August also had a bigger than expected decrease in the food and beverage category (-0.8%), which is shocking, if you saw the food they were selling at the CNE this year.  Why am I dragging on about retail sales? Well, it gives us and the BOC an idea of consumer spending which feeds into the market’s expectations about GDP numbers (which are released next week).

Following retail sales, we received the 2nd last Business Outlook Survey for the year. The survey polls businesses to get their economic perspectives for the past year and going forward. Overall, the BOS showed a slight improvement in the economic environment for businesses. Capital investment was reported as strong, with the balance of opinion on investments in machinery and equipment increasing in the next 12 months. The opposite occurred in sales expectations as firms expect those lower over the next 12 months. The BOS also reported that firms are seeing labour shortages that are now more intense. From a market perspective, not much in the BOS but it did undue much of the pain from the weak retail sales number mentioned above.

Next Week

Currently, the market is predicting no hikes by the Bank of Canada in 2019 or 2020, with the probability of a cut in 2019 sitting around 25%.  South of the border is a different story however. The market has all but priced in a cut of 25bps by the Fed next Wednesday, which would put this cut cycle at 75bps. Couple this with US/Canada GDP, US payrolls and the ongoing Brexit/China discussions, next week could be a volatile week in the rates markets. Luckily for you, First National offers the ability to “early rate-lock” your commercial mortgage, which takes all the volatility out of the equation.


After all that, if you were to guess, you probably thought a lot has changed over the past two weeks. And you would be wrong. Dead wrong. The 5-year GoC is yielding 1. 55% today, which is the same as last Friday. The 10-year GoC is currently yielding 1.52% and it was yielding 1.54% last Friday. This is only 11 bps higher than a month ago for the 5-year GoC and 12 bps higher for the 10-year GoC for the same time period.

Which brings me to the completely unrelated point of Bacon. Pork bellies, which are the only ingredients in bacon, are currently at a 50-year supply high in the USA. More than 40 Million pounds of pork bellies were sitting in USA refrigerated warehouses in September, the most since 1971. 

Change the world this weekend: order a double portion of bacon at brunch.