First National Financial LP

Market Commentary: An update on rates and July’s inflation numbers

  • Andrew Masliwec, Analyst, Capital Markets


It’s been exactly 168 days since I’ve had to ride the TTC. Do I miss being shoulder to shoulder with complete strangers first thing in the morning? Yes. Big time. However, what I miss even more would be the total Zenlike journey wherein I’m able to formulate these commentaries. Alas, I finally found some time out of my hectic work from home schedule to put the virtual pen to paper once more.

Marketing has never been happier.


If you didn’t know, there still exists a bond market where bonds trade. The current 5-year Government of Canada bond is trading at a yield of 0.36% and the current 10-year Government of Canada bond is trading at a yield of 0.54%. If you’re wondering where they were trading pre-COVID, it doesn’t matter because that seems like an eternity ago. In some good news, other than our record low borrowing rates, Canada Mortgage bond spread tightened in recent months. The current 5-year CMB is yielding +25 bps over the 5-year GoC or 0.61%. The 10-year CMB is trading at a yield of +39 bps or 0.93%.

Speaking of the 10-year CMB, we had the final reopening of the current June 2030 maturity of the CMB this past Wednesday. As an issuer into the CMB program, we were surprised that the issue size for the deal was 4.25 Billion. We’re always looking for larger deal sizes, as it helps you, the borrower, get better mortgage rates. However, some forewarning from CMHC is always nice to get our “mortgage ducks” in a row. I’m not complaining though. Never. Overall the deal was a success, being issued at a spread of +39 bps over Canada’s.

Economic News

If the Leaf’s lack of a playoff run and the Hab’s doing the opposite is any indication, statistics just don’t matter like they used to under COVID. However, I have some white space to work with and we had some semi-interesting stats the last couple days.

July inflation numbers or CPI came out on Wednesday. There was a large downside miss from the +0.3% expected, where the actual only rose 0.1%. Basically, we seem to be printing a ton of money and inflation still isn’t rising that much from a year ago. The largest decliners category-wise come as no surprise, as travel fell from -5.9% YoY to -11.7% YoY.  My last vacation was going to Fortino’s deli section.

This morning we had Canadian retail sales for June. Retail sales beat, increasing +24.5% month-over-month. Obviously throughout COVID, it’s tough to navigate the noise in the statistic numbers as they can rise and fall sharply. What’s key to remember is that retail sales in 2020 are only -8.1% lower than 2019 by RBC’s estimate. All things considered, that’s not as bad as I would think. Maybe we will get a “V-shaped” recovery after all.

Finally, if you ever get the opportunity to take me out to an expensive dinner, you’d know I’m a cheap date as I don’t eat dessert or chocolate. However, I am a huge pop guy. It’s weird I know. So right when I think 2020 couldn’t get any worse, I read the headlines that there’s a Dr. Pepper shortage in North America. Apparently first they come for toilet paper, then Lysol wipes and then finally Dr. Pepper. I’m not one to judge the average consumer, but I am pretty sure it doesn’t have any medicinal properties as he’s not a real doctor, so I don’t ever see the need to hoard it. Luckily, for the time being at least, I’m one of five people who enjoys a nice crisp Brio.

Here’s to hoping the tough times are behind us and we can all enjoy those Friday beers.