First National Financial LP

Market Commentary: An update on rates and January employment numbers

  • Andrew Masliwec, Analyst, Capital Markets


Wow has the world changed since last commentary. How? Well for one, coronavirus was just a twinkle in the eye of whatever host it mutated from. Two, if I was reading Twitter correctly, World War 3 was on its way because of the Iran situation. Crazy how fast things change. Markets now are less interested on the latter and completely focused on the former. Don’t believe me? Just look at the Google trend:


*note: this does not include any of the 1,000  Bing users

Because remember, average consumer sentiment drives these markets!


So where have rates gone in the wake of the coronavirus pandemic? The 5 year GoC is currently yielding 1.36% while the 10 year is yielding 1.34%. The ‘belly’ of our curve is still inverted. Compared to a week ago, the 5 year was yielding 1.28% and the 10 year was yielding 1.27%. If you go back a month, around the time of our last commentary (we hear you marketing ladies), both the 5 and 10 year Government of Canada Bonds were yielding 1.63%.

Canada Mortgage Bonds are also lower than a month ago. The current 5 year CMB is yielding 1.64% and the current 10 year is yielding 1.71%. Compared to a month ago, the 5 year is 25 bps lower and the 10 year is 30 bps lower. It’s a good time as ever to explore an early rate-lock with First National. Help us, help you.

Economic News

How’s the economy doing? Well better than the Bank of Canada would have you believe. The last Bank of Canada meeting and statement came off as ‘dovish’ to many in the market. If you recall, the Bank’s signaling for further potential rate cuts was focused around an extension of further weakness in data. Since then, we’ve had precisely the opposite.

Case in point, today brought January Canadian employment numbers. The job market beat expectations adding 34.5K jobs vs the 17.5K expected. The unemployment rate also fell to 5.5%. That’s all-around good news. Full-time positions rising 35.7K was also encouraging, as was the average hourly earnings of permanent workers gaining 4.4%. If there was one negative, private sector jobs only grew +5,000 versus the public sector, which made up the majority of the job creation at 21.3K.

Today’s strong job numbers only added to the string of strong economic data that beat expectations.  Retail sales, GDP and trade reports since the last Bank of Canada meeting have all exceeded market expectations. All in all, signs point for the potential for rate cuts in 2020 as being lower. The market is currently pricing a 5% chance of a rate cut on the next meeting date, March 4th.

Finally, the POTUS also known as Donald Trump was acquitted on his impeachment by the Senate this past week.  With all the drama and lack of bipartisanship south of the border, I guess we can find solace that our Prime Minister’s biggest shake up has been his new beard. What will he do next?

Have a good weekend,