Interest Rates

Ottawa — Reuters Published on Sunday, Dec. 06, 2009 10:57AM EST Last updated on Sunday, Dec. 06, 2009 4:56PM EST

The Bank of Canada <http://www.theglobeandmail.com/report-on-business/carney-may-try-to-stifle-rate-speculation/article1390435/> is widely expected to keep its hands off interest rates Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.
Fears of prolonged economic stagnation eased Friday with a report showing employers hired five times as many workers as expected. The data supported the Bank of Canada's view that economic growth <http://www.theglobeandmail.com/report-on-business/carney-may-try-to-stifle-rate-speculation/article1390435/> will speed up in the fourth quarter after a disappointing third-quarter, when it barely crept out of recession with tepid 0.4 per cent annualized growth.
All 12 of Canada's primary securities dealers <http://www.theglobeandmail.com/report-on-business/carney-may-try-to-stifle-rate-speculation/article1390435/> , surveyed by Reuters after the jobs report Friday, forecast the central bank would hold its overnight target rate unchanged at 0.25 per cent at its final policy-setting meeting of the year.
The bank releases its rate decision and accompanying statement at 9 a.m. ET Tuesday.
Two-thirds of the traders think the bank will follow through on its pledge to hold rates at that level through mid-2010, conditional on inflation staying on track.
“They will lean over backward to make their conditional forecast come true,” said David Laidler, an economist with the C.D. Howe Institute.
“What they might start doing between now and June or July, is they might start making more and more public noises about the need to raise interest rates <http://www.theglobeandmail.com/report-on-business/carney-may-try-to-stifle-rate-speculation/article1390435/> immediately afterward. That's the kind of thing you'll see but not in this announcement,” he said.
Others think the bank's job will be to dampen any speculation that it will abandon its zero-rate policy at the earliest opportunity.
“We expect the bank to attempt to temper early rate hike expectations at next Tuesday's policy announcement,” said Sheryl King, head of Canadian economics and strategy at Bank of America Merrill Lynch.
The Bank of Canada will be pleased with the November job gains, not just because its prophecy of a robust 3.3 per cent fourth quarter may be fulfilled but because it lessens the bank's concerns about the strong Canadian dollar hindering a robust recovery.

Royal Bank, TD and BMO cut rates for fixed-rate residential mortgages

November 18, 2009
THE CANADIAN PRESS
TORONTO - Several of Canada's big banks said Wednesday they would cut their posted rates for fixed-rate mortgages by up to 0.25 percentage points.
The Royal Bank (TSX:RY) cut its rates for one, two and three-year closed mortgages by 0.20 percentage points, effective Thursday.
Canada's largest bank cut is posted five-year closed rate by 0.15 percentage points to 5.59 per cent, while its special five-year closed rate was cut by the same amounted to 4.29 per cent.
Bank of Montreal (TSX:BMO) cut nearly all of its posted fixed rates including its one and 10-year fixed rates by 0.25 percentage points. The bank's five-year rate was dropped by 0.19 percentage points to 5.59 per cent.
BMO offered a special five-year fixed rate of 4.29 per cent, down 0.19 percentage points.
TD Bank (TSX:TD) cut its five-year closed rate, lowering it by 0.15 percentage points to 5.63 per cent, effective Thursday.
The changes reflect lower interest rates in the bond market, where banks raise money to finance their mortgage lending.
Both banks said their variable closed mortgage rate at prime will remain unchanged.

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Luxury housing sales edge higher as purchasers take advantage of buying opportunities in Ontario-Atlantic Canada, says RE/MAX

Mississauga, Ontario (November 3, 2009) - Luxury homes sales continue to accelerate as economic recovery takes hold in major markets in Ontario and Atlantic Canada, according to a report released today by RE/MAX.

The RE/MAX Upper End Report found that momentum is building in St. John's, Saint John, Halifax-Dartmouth, Ottawa, Kingston, Greater Toronto, Hamilton-Burlington, and London as purchasers realize that the best buying period in recent history is about to come to a close. Sales are already on par or ahead of last year's levels in 50 per cent of cities surveyed, while the remaining markets are set to reach 2008 figures by year-end.

"Twelve months of healthy home buying activity have clearly been crammed into five short months," says Michael Polzler, Executive Vice President, RE/MAX Ontario-Atlantic Canada. "It's hard to believe that the transition in the market began in May. We've seen steady upward momentum since that time, with solid year-over-year gains posted each and every month."

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Interest Rate Increase

Good Morning

Please be advised that the Government of Canada 5 year yields have increased by over 30 bpts over the last couple of days and currently sit at 2.86%. Should this trend hold, you will most likely see the interest rates in the market on the 5 year fixed rise 25-30 bpts in the coming week by all lenders. Royal Bank of Canada has increased their 5 year special and posted rates by 35 basis points effective today.

On the variable rate mortgage side, spreads are stable based on the 30/90 day paper and there is no short term expectation that ARM/VRM rates will rise.

5 Year Government Of Canada Bond Yields:

2 Oct 2009: 2.50
5 Oct 2009: 2.48
6 Oct 2009: 2.55
7 Oct 2009: 2.54
8 Oct 2009: 2.63
9 Oct 2009 2.86

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