Return of the Treasury Guy

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

A long time ago in a galaxy far, far away the Treasury Guy used to write a commentary from time to time.  It’s been a while, and in the meantime turmoil has engulfed the Republic.  The taxation of trade routes by the vile gangster Jaba the Trump is in dispute.  While others endlessly debate this alarming chain of events, First National has secretly dispatched Treasury Guy to settle the conflict.

After that opening, I’ll need to lock my office door.  The commercial mortgage guys beat up nerds like me even without an excuse.  In fact, I’m a little worried.  If you’ve been following the news, you’ll have read about Nancy Brophy.  She wrote a book called “How to Murder Your Husband” and has now been arrested for doing just that.  What has me concerned is I noticed a draft of something called “How to Murder Your Treasury Guy” left on the counter in the commercial underwriting break room…

Central Banks and Interest Rates

It’s been relatively quiet this week but we’ve had some rate creep despite softer than expected US CPI yesterday and retail sales today.  While the CPI reading won’t discourage the Fed from raising rates in two weeks, if wage and price growth remain muted it could contribute to slower tightening next year.  Here at home, the Bank of Canada left rates unchanged back on September 5th and will meet again on October 24th.  Implied probability of a 25bp hike is at 85% (based on where Overnight Index Swaps are trading).  Current overnight rate is 1.50% and Prime is 3.70%.

5 and 10 year GoCs are about 7 basis points higher this week and are trading around 2.27% and 2.35% respectively.

Mortgage Securitization News

Canada Housing Trust launched the new ‘5-year’ CMB this morning.  The 2.55% December 2023 issue has been upsized from 5.0 billion to 5.5 billion at a spread of GoC +31.5.  Expect the issue to be re-opened in December. 

In non-CMHC sponsored securitization, MCAP announced the launch of their second Residential Mortgage Backed Security (“RMBS”) of 2018.  MRIC 2018-2 is a $250 million pool of conventional residential mortgage loans with an average remaining term of 48 months.  The deal is a senior/subordinate sequential pass through with 6% credit enhancement to the Class A notes rated AAA.  The Class A notes on the previous transaction (March) were issued at GoC+100.  Since then credit spreads have widened modestly and guidance for new deal is in the context of GoC+105.  Pricing is expected next week. 


Global equity markets (with the sad exception of the TSX) have fared well this week and are opening positively this morning.  All told, it is a pretty positive outlook.  Prospects for US-China trade talks and action by Turkey and Russia to support their currencies helped foster the positive mood and extend the rally in emerging markets.


That’s all I’ve got time for today.  Need to get some work done and start stretching.  Mrs. Treasury Guy has signed me up for the ‘Half Tough Mudder’ tomorrow.  That will put me waaay out of my comfort zone for weekend physical activity.  I typically prefer my weekends to be more of a couch-bound kind of thing.  Oh well…at least there’s beer at the end.

Here’s mud in your eye,

Treasury Guy