Sales are still happening and there is activity … just less of it. Here’s to hoping the market rebounds as quickly as it dropped. See below from Dr Cooper. Cheers!
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General Bob Rees 15 May
Sales are still happening and there is activity … just less of it. Here’s to hoping the market rebounds as quickly as it dropped. See below from Dr Cooper. Cheers!
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General Bob Rees 16 Apr
Quick post to provide a link to our DLC Site that will provide updates and relevant information around COVID-19 in general and also for Homeowners.
Feel free to bookmark and check back regularly to get additional updated information as more details arise
https://dominionlending.ca/covid-19/#
Bob Rees
Mortgage Broker
Powered by Maximal Mortgages and Dominion Lending Centres DLC
bob@bobreesmortgages.com
Call/Text: 780-975-9747
General Bob Rees 15 Apr
The Bank of Canada today maintained its target for the overnight rate at ¼ percent, which the Bank considers its effective lower bound. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. The Bank also announced new measures to provide additional support to Canada’s financial system.
The necessary efforts to contain the COVID-19 pandemic have caused a sudden and deep contraction in economic activity and employment worldwide. In financial markets, this has driven a flight to safety and a sharp repricing of a wide range of assets. It has also pushed down prices for commodities, especially oil. In this environment, the Canadian dollar has depreciated since January, although by less than many other currencies. The sudden halt in global activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region. This means that the global economic recovery, when it comes, could be protracted and uneven.
The Canadian economy was in a solid position ahead of the COVID-19 outbreak, but has since been hit by widespread shutdowns and lower oil prices. One early measure of the extent of the damage was an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April some six million Canadians had applied for the Canada Emergency Response Benefit.
The outlook is too uncertain at this point to provide a complete forecast. However, Bank analysis of alternative scenarios suggests the level of real activity was down 1-3 percent in the first quarter of 2020, and will be 15-30 percent lower in the second quarter than in fourth-quarter 2019. CPI inflation is expected to be close to 0 percent in the second quarter of 2020. This is primarily due to the transitory effects of lower gasoline prices.
The pandemic-driven contraction has prompted decisive policy action to support individuals and businesses and to lay the foundation for economic recovery once containment measures start to ease. Fiscal programs, designed to expand according to the magnitude of the shock, will help individuals and businesses weather this shutdown phase of the pandemic, and support incomes and confidence leading into the recovery. These programs have been complemented by actions taken by other federal agencies and provincial governments.
For its part, the Bank of Canada has taken measures to improve market function so that monetary policy actions have their intended effect on the economy. This helps ensure that households and businesses continue to have access to the credit they need to bridge this difficult time, and that lower interest rates find their way to ultimate borrowers. The Bank has lowered its target for the overnight rate 150 basis points over the last three weeks, to its effective lower bound. It has also conducted lending operations to financial institutions and asset purchases in core funding markets amounting to around $200 billion.
These actions have served to ease market dysfunction and help keep credit channels open, although they remain strained. The next challenge for markets will be managing increased demand for near-term financing by federal and provincial governments, and businesses and households. The situation calls for special actions by the central bank. To this end, the Bank is furthering its efforts with several important steps.
Under its previously-announced program, the Bank will continue to purchase at least $5 billion in Government of Canada securities per week in the secondary market, and will increase the level of purchases as required to maintain proper functioning of the government bond market. Also, the Bank is temporarily increasing the amount of Treasury Bills it acquires at auctions to up to 40 percent, effective immediately.
The Bank is also announcing today the development of a new Provincial Bond Purchase Program of up to $50 billion, to supplement its Provincial Money Market Purchase Program. Further, the Bank is announcing a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment grade corporate bonds in the secondary market. Both of these programs will be put in place in the coming weeks. Finally, the Bank is further enhancing its term repo facility to permit funding for up to 24 months.
These measures will work in combination to ease pressure on Canadian borrowers. As containment restrictions are eased and economic activity resumes, fiscal and monetary policy actions will help underpin confidence and stimulate spending by consumers and businesses to restore growth. The Bank’s Governing Council stands ready to adjust the scale or duration of its programs if necessary. All the Bank’s actions are aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.
The next scheduled date for announcing the overnight rate target is June 3, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on July 15, 2020.
General Bob Rees 15 Apr
Thank you to our Chief Economist, Sherry Cooper, for the below insight and breakdown of the Bank of Canada’s rate decision today.
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General Bob Rees 30 Mar
Dr Cooper, thank you for your insight during these unprecedented times 🙂
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General Bob Rees 27 Mar
Thank you Dr Cooper, another prime rate drop ….. interesting time!
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General Bob Rees 16 Mar
Contrary to public opinion, we have been told (and have already seen) that fixed rates will now increase. Please see below article that explains.
8 MIN READ
LONDON (Reuters) – The coronavirus panic is jolting stock markets, with steep drops in major indexes grabbing the public’s attention. But behind the scenes, there is less understood and potentially more worrying evidence that stress is building to dangerous levels in crucial arteries of the financial system.
Bankers, companies and individual investors are dashing to stock up on cash and other assets considered safe in a downturn to ride out the chaos. This sudden flight to safety is causing havoc in markets for bonds, currency and loans to a degree that hasn’t been seen since the financial crisis of a dozen years ago.
The key concern now, as in 2008, is liquidity: the ready availability of cash and other easily traded financial instruments – and of buyers and sellers who feel secure enough to do deals.
Investors are having trouble buying and selling U.S. Treasuries, considered the safest of all assets. It’s a highly unusual occurrence for one of the world’s most readily tradable financial instruments. Funding in U.S. dollars, the world’s most traded currency, is getting harder to obtain outside the United States.
The cost of funding for money that companies use to make payrolls and other essential short-term needs is rising for weaker-rated firms in the United States. The premium investors pay to buy insurance on junk bonds is increasing. Banks are charging each other more for overnight loans, and companies are drawing down their lines of credit, in case they dry up later.
Taken together, warn some bankers, regulators and investors, these red flags are starting to paint a troubling picture for markets and the global economy: If banks, companies and consumers panic, they can set off a chain of retrenchment that spirals into a bigger funding crunch – and ultimately a deep recession.
Francesco Papadia, who oversaw the European Central Bank’s market operations during the region’s debt crisis a decade ago, said his biggest fear is that the “illiquidity of markets, generated by extreme uncertainty and panic reaction” could “lead to markets freezing, which is an economic life-threatening event.”
“It does not seem to me we are there already, but we could get there quickly,” Papadia said.
A sign of the times is a hashtag now trending on Twitter: #GFC2 – a reference to the possibility of a second global financial crisis.
The warning signals so far are nowhere near as loud as they were in the 2008-2009 financial crisis, or the 2011-2012 euro zone debt crisis, to be sure. And policymakers are acutely aware of the weaknesses in the financial-market plumbing. In recent days, they have ramped up their response.
Central banks have cut interest rates and pumped trillions of dollars of liquidity into the banking system. On Sunday, the U.S. Federal Reserve slashed rates back to near zero, restarted bond buying and joined with other central banks to ensure liquidity in dollar lending to help shore up the economy.
“The one thing central banks know how to do following the experience of 2008 is to prevent a funding crisis from happening,” said Ajay Rajadhyaksha, head of macro research at Barclays Plc and member of a committee that advises the U.S. Treasury on debt management and the economy.
While the panic sweeping markets is reminiscent of the 2008 financial crisis, comparisons only go so far. Central bankers have last decade’s shocks fresh in their memories. Another key difference: Banks are in better shape today.
In 2008, banks had far less capital and far less liquidity than they have now, said Rodgin Cohen, senior chairman of Wall Street law firm Sullivan & Cromwell LLP and a top advisor to major U.S. financial firms.
Instead, investors and analysts said, the risk this time comes from the pandemic’s impact on the real economy: shuttered shops, travel bans and sections of the labor force sick or quarantined. The freeze means a severe blow for corporate revenues and earnings and overall economic growth, and for now, there is no end in sight.
JPMorgan Chase & Co economists expect first-half contractions in growth across the globe. And this is as the U.S. response to the coronavirus is only getting started.
GRAPHIC: Coronavirus hits financial markets – here
Investors and regulators have been alarmed, in particular, by liquidity problems in the $17 trillion U.S. Treasuries market.
There are several signs that something is off. Interest rates, or yields, on Treasuries and other bonds move in inverse relation to their prices: If prices fall, the yields rise. Changes are measured in basis points, or hundredths of a percent.
Typically, yields move a few basis points a day. Now, large and unusually quick swings in yields are making it hard for investors to execute orders. Traders said dealers on Wednesday and Thursday significantly widened the spread in price at which they were willing to buy and sell Treasury bonds – a sign of reduced liquidity.
“The tremors in the Treasury market are the most ominous sign,” said Papadia, the ex-ECB official.
Another alarming signal is the premium non-U.S. borrowers are willing to pay to access dollars, a widely watched gauge of a potential cash crunch. The three-month euro-dollar EURCBS3M=ICAP and dollar-yen JPYCBS3M=ICAP swap spreads surged to their widest since 2017, before dropping on Friday after central banks pumped in more cash.
A measure of the health of the banking system is flashing yellow. The Libor-OIS spread USDL-O0X3=R, which indicates the risk banks are attaching to lending money to one another, has jumped. The spread is now 76 basis points, up from about 13 basis point on Feb. 21, before the coronavirus crunch began in the West. In 2008, it peaked at around 365 basis points.
GRAPHIC: Dollar funding – here
As funding markets creak, heavily indebted companies are feeling the heat.
Credit ratings firm Moody’s warns that defaults on lower-rated corporate bonds could spike to 9.7% of outstanding debt in a “pessimistic scenario,” compared with a historical average of 4.1%. The default rate reached 13.4% during the financial crisis.
The cost of insuring against junk debt defaults jumped on Thursday to its highest level in the United States since 2011 and the loftiest in Europe since 2012.
Some companies are now paying more for short-term borrowing. The premium that investors demand to hold riskier commercial paper versus the safer equivalent rose to its highest level this week since March 2009.
Several companies are drawing down on their credit lines with banks or increasing the size of their facilities to ensure they have liquidity when they need it. Bankers said companies fear lenders may not fund agreed credit lines should the market turmoil intensify.
An official at a major central bank said the situation is “pretty bad, as all stars are aligned in a negative way.””Cracks will start to emerge soon,” the official said, “but whether they will develop into something systemic is still hard to say.”
Additional reporting by Sujata Rao and Yoruk Bahceli in London, Tom Westbrook in Singapore and Lawrence Delevingne and Matt Scuffham in New York.; Editing by Paritosh Bansal, Mike Williams and Edward Tobin
General Bob Rees 16 Mar
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General Bob Rees 13 Mar
Well, this is getting interesting ……
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General Bob Rees 9 Mar
Thank you Dr Cooper for your insight 🙂
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