KEEPING YOU INFORMED: COVID-19 information for residential customers & commercial borrowers
╲╱

Our residential call centre is experiencing higher than normal wait times.

If you are a residential customer experiencing financial hardship due to COVID-19 and need to request a mortgage payment assistance, please submit a payment assistance request through My Mortgage.

If you are a commercial borrower experiencing financial hardship due to COVID-19, please email our Payments team at commercial.payments@firstnational.ca.

Be assured that we are committed to getting back to all of you who have contacted us.

Your patience is appreciated, and we thank you for your understanding.

Close

Jason Ellis reviews this week’s interest rate hike

  • Jason Ellis, Senior Vice President and Managing Director, Capital Markets

Greetings mortgage people,

Good morning and congratulations.  You’ve almost reached the end of the most depressing week of the year.  According to the formula ((W+(D-d))*TQ) / (M*Na), this past Monday was ‘Blue Monday’.  Variables like the weather, debt, and time since Christmas combine to measure a general feeling of malaise.  My favourite variable, however, is “Na”.  That’s the variable that measures the “feeling of a need to take no action”.  I am definitely scoring high on Na.  Let’s get this done so I can get back to taking no action as quickly as possible.

Interest Rates in Tabular and Bullet Point Form

Bond

Today
Jan 19, 2018

1 week ago
Jan 12, 2018

4 weeks ago
Dec 22, 2017

8 weeks ago
Nov 24, 2017

26 weeks ago
Jul 21, 2017

52 weeks ago
Jan 20, 2017

GoC 2s
(Feb 2020)

1.80

1.76 

1.66

1.44 

1.25 

0.77 

GoC 5s
(Sep 2022)

2.02 

1.97 

1.84 

1.63 

1.52 

1.13 

GoC 10s
(Jun 2027)

 2.22

2.17 

2.03

1.89 

1.89 

1.67 

 

  • CMB 2s (Mar 2020) are trading at 1.89% or GoC 2s +9.0
  • CMB 5s (Dec 2022) are trading at 2.29% or GoC 5s +27.0
  • CMB 10s (Mar 2028) trading at 2.58% or GoC 10s +36.0

This Week

US markets closed for Martin Luther King Jr. Day on Monday and the market was predictably quiet. 

A Colorado based hedge fund accused Canada’s six biggest banks of conspiring to manipulate CDOR (the interest rate benchmark) to boost profits on derivative trades in the years prior to 2014.  Regulators took steps in 2014 to better govern the CDOR rate following allegations that global banks had rigged the LIBOR benchmark in the US and Europe.  I wouldn’t let this news affect your plans for the weekend.   

CMHC shuffled senior executive roles “to better address current and emerging business needs”.   The changes include the combination of the insurance and securitization groups under the newly created position of Chief Commercial Officer.  Treasury Guy is agnostic about the change until given reason to feel otherwise. 

On Wednesday, the Bank of Canada raised its overnight rate by 25 basis points to 1.25%.  The move was not a surprise as markets had largely anticipated the increase.  The related commentary resulted in the rarely seen ‘dovish’ hike.  The bank stated it would be “cautious” with future rate moves and highlighted risks associated with NAFTA saying “some continued monetary policy accommodation will likely be needed”.  On the other hand, the accompanying Monetary Policy Report bumped up economic forecasts reflecting a stronger US outlook due to tax cuts there.  Bond yields oscillated around either side of unchanged following the announcement.  All told, I have no advice or predictions for you.  Buy low, sell high I guess.  That’s usually good.

Ahead of the BoC hike, all six big Canadian banks had raised their benchmark 5 year posted mortgage rates from 4.99% to 5.14%.  This is the benchmark rate used to calculate debt service ratios when underwriting new residential mortgage applications.  The rate is now up 50 basis points since July and at its highest level in nearly 4 years.  In other mortgage news, the human torch was denied a bank loan.

Finally, lots of new issue activity this week and all deals were massively oversubscribed.  It’s a seller’s market.  Among the new issues, H&R Reit (BBB(high)) brought $250 million 5 year senior unsecured notes at GOC +137.  The deal was upsized from $200 million, pricing was at tightest end of guidance, and was 7x oversubscribed.  

Shutdown Drama

The US government will shut down at midnight today unless someone blinks.  The senate adjourned last night without passing any funding measures to keep the government running.  During a shutdown, nearly 40% of the government workforce is placed on unpaid furlough.  The last government shut down, in October 2013, cost the US economy $20 billion.  Don’t worry though; Treasury Guy will be at his desk on Monday, ready to fund your mortgages, regardless of the outcome.

Conclusion

All this typing (and those pretzels I had earlier) has made me thirsty, but I told Mrs. Treasury Guy I wouldn’t drink tonight.  I have a big day tomorrow…actually, a pretty nice little Saturday.  We’re going to go to Home Depot…buy some wallpaper; maybe get some flooring, stuff like that.  Maybe Bed, Bath, and Beyond... I don’t know if we’ll have enough time. 

Have a good weekend, and don’t forget…a tarantula enjoys a fine chewing gum.

Stay Classy,

Treasury Guy.