Rates back up more

It looks like the U.S. election is yielding a decisive verdict, and that’s good news. Risky assets like stocks and cryptocurrencies are up sharply on the promise of less regulation and further tax cuts from a Republican-led government.

In less bullish news, the Treasury market continues to sell off, with a rate backup that began in mid-September. The US 10-year yield at 4.45% this morning is up 83 basis points from 3.62% on September 16 and back to the same level as July 1, 2024, and September 2023, before that.

In September 2023, the U.S. consumer price index rate of change (CPI) was 3.7% year-over-year, compared to 2.4% this September. The US Federal Funds rate was at 5.33% versus 4.83% today.

But that’s where the good news ends. Fixed credit rates follow Treasury yields. Yesterday, the benchmark U.S. 30-year mortgage rate was 6.72%, up more than half a percent from 6.13% in September 2023.

Financial conditions have eased further for the largest publicly traded corporations reporting record profits.  However, times are more challenging for the bulk of the economy—households and small businesses—that get their funding through the banking and private lending system.

Something’s got to give. Euphoric pricing in publicly traded corporate securities makes it harder for the U.S. Fed to deliver monetary easing.  The Powell-led Fed wants to ease interest rates for Main Street, but that’s not happening yet.

Eventually, even large public corporations need growing demand from the private sector to keep their revenue and earnings forecasts moving higher. Attaining those targets is now more challenging.

Posted in Main Page | Comments Off on Rates back up more

Home listings rise as pandemic-era mortgages approach renewal

A new CMHC report notes that 1.2 million mortgages are up for renewal in 2025 and 980,000 in 2026. About 85% have fixed rates contracted when mortgage rates were below 2% compared with over 4% today.

Although the Bank of Canada has lowered its base rate from 5 to 3.75% since June, Canadian fixed-term loan rates have risen over the past month as government bond prices dipped, driving up yields/fixed borrowing rates.

In the historically slow season for real estate transactions, a flood of stressed homeowners are putting their properties up for sale. See More than a million mortgage renewals in 2025 could mean a listings surge as stressed owners sell homes they can’t afford.

The trend is particularly evident in private lending, where higher interest rates and less stringent lending standards led to homeowners becoming particularly overextended.

In the second quarter of 2024, the percentage of single-family homes with mortgage payments that were late 60 days or more was 5%, up from 1.7% in the fourth quarter of 2022.

Car loans, credit cards, and credit lines have also significantly increased late payments. CMHC noted, “Credit card and auto delinquencies can be leading indicators of mortgage delinquency rates, so these patterns suggest that mortgage delinquency will continue to increase into 2025.”

A new Angus Reid poll finds that 42% of Canadians say they are financially worse off today than at the start of the year. See, Feeling the financial pinch? You’re not alone:

Almost three-quarters of Canadians have “delayed” major financial goals or milestones due to the “current economic climate,” according to new survey data commissioned by the online estate planning platform Willful and collected by the Angus Reid Forum.

Nearly half of respondents said they’ve “had to use savings to cover day-to-day expenses” over the last 12 months, while 42 per cent of Canadians say they’re in a worse financial situation now than they were at the beginning of the year.

Posted in Main Page | Comments Off on Home listings rise as pandemic-era mortgages approach renewal

Danielle’s biweekly market update

Danielle was a guest with Jim Goddard on Talk Digital Network, discussing recent world economy and market developments. You can listen to an audio clip of the segment here.

Posted in Main Page | Comments Off on Danielle’s biweekly market update