Category: Market Action

Carnage and despair was the order of the day:

Wall Street ended sharply lower on Thursday, with steep losses in Nvidia and other AI heavyweights, as investors scaled back expectations of interest rate cuts due to inflation worries and divisions among central bankers about the U.S. economy’s health. The selloff extended to Canada, where the main index posted its biggest decline in seven months, with tech stocks leading the fall.

All three major U.S. stock indexes posted their steepest daily percentage declines in over a month. The U.S. government reopened after a record 43-day shutdown that had worried investors and disrupted the flow of economic data.

A growing number of Federal Reserve policymakers in recent days have signaled hesitation about further interest rate cuts, pushing financial market-based odds of a reduction in borrowing costs in December to near even. Fed officials who spoke recently cited worries about inflation and signs of relative stability in the labour market after two U.S. interest rate cuts this year.
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Traders are pricing in about a 47% chance of a 25-basis-point rate cut in December, lower than last week’s 70% probability, according to CME Group’s FedWatch tool.

Shares fell for some of the U.S. stock market’s strongest performers in recent years, as investors fretted about high valuations fueled by optimism about artificial intelligence.

Nvidia, the world’s most valuable company, dropped 3.6%, Tesla fell 6.6% and Broadcom declined 4.3%.
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The S&P 500 declined 1.66% to end the session at 6,737.49 points. The Nasdaq fell 2.29% to 22,870.36 points, while the Dow Jones Industrial Average declined 1.65% to 47,457.22 points.

The S&P/TSX composite index ended down 573.94 points, or 1.9%, at 30,253.64, after posting a record high closing level on Wednesday.

Canadian preferreds got off lightly, with the TXPR Price Index down 22bp.

PerpetualDiscounts now yield 5.49%, equivalent to 7.14% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.72% on 2025-11-12, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained at the 240bp reported October 29.

The TXPR Price Index set a new 52-week high today of 693.91, beating the old mark of 693.26 set October 31.

The Globe had a nice piece about Canadian corporates:

Low interest rates are attracting companies that previously relied on other funding options, such as bank loans. Combined with new issuers at home and the flood of foreign companies tapping the domestic corporate debt market from abroad, businesses generally just need more capital to build costly data centres and restructure supply chains in response to protectionist risks.

And despite all the new supply, investors are gobbling up every deal that emerges.
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The official stats don’t actually tell the whole story. Maple deals, which refer to non-Canadian companies issuing Canadian dollar-denominated bonds in the Canadian market, are not included in LSEG data and are also soaring.

From Jan. 1 through Sept. 25, RBC tracked more than $14-billion worth of maple transactions, putting that subset of the market on track for its second-best year, with only the dealmaking frenzy of 2021 delivering larger maple numbers.

The demand for maple bonds is partly due to a technical change implemented at the start of 2025, when newly issued maple bonds started getting included in the FTSE Canada Universe Bond Index. That change gave maple issuers access to a much larger pool of investors, including the massive contingent of investors that own index-tracking funds.
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Corporate credit spreads, meanwhile, are near record lows. Because they measure the difference in yield between a corporate bond and a risk-free government bond, such narrow spreads imply investors perceive very little risk in lending to Canadian businesses.
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As of Sept. 25, roughly $9.6-billion worth of Canadian corporate hybrid bonds have been issued since the start of 2025, RBC data shows. In 2024, nearly a record-setting year for Canadian corporate bond issuance overall, total hybrid issuance was just $1.1-billion.

That 2025 figure might appear low relative to the more than $50-billion in debt corporate Canada issues in any given year. But for perspective, consider that Canadian companies issued a total of $8.9-billion in hybrid debt over the five most recent calendar years, from 2020 through 2024, or $700-million less than what has been issued so far in 2025 alone. And the year is not over.

What goes up must come down … the size of the issuance and particularly strength of the hybrid and Maple issuance, may be considered an indicator – but only one indicator! – that the bond market’s a bit on the toppy side.

The Boston Fed has released a working paper by Stefano Corradin, José L. Fillat, and Carles Vergara-Alert titled Misestimating House Values: Consequences for Household Finance:

Key Findings
About 5 percent of homeowners undervalue their house by at least $87,500, and 5 percent overvalue their house by at least $53,000.
A $59,800 increase in house overvaluation, which represents one standard deviation, results, on average, in a 1.1 to 1.9 percent decrease in a household’s risky stockholdings.
The same increase in house overvaluation results in a 1.3 to 2.5 percent increase over liquid wealth in the share of a household’s assets that are risk free, holding house value and mortgage debt constant.
In addition, the increase in overvaluation leads to a 1.5 to 4.3 percent (or 2.63 to 4.31 percentage point) increase in a household’s consumption relative to its liquid wealth.

Implications
The findings underscore the role of housing-value misestimation in the marginal propensity to consume, suggesting that households adjust their spending behavior in response to perceived, in addition to actual, wealth gains. Additionally, the findings show that households with higher perceived house values tend to reallocate financial assets away from stocks toward risk-free assets, reinforcing a conservative shift in their financial portfolio composition. These results suggest that financial advisors and policymakers should account for biases in housing wealth perceptions when designing investment and retirement strategies. In addition, given the widespread use of home equity as collateral, the findings imply that misestimation of house values could have significant implications for credit availability and macroeconomic stability.

A New York Fed staff report by Alain Chaboud, Ellen Correia Golay, Michael Fleming, Yesol Huh, Frank Keane and Or Shachar titled Liquidity and Trading Dynamics in the Off-the-Run U.S. Treasury Market didn’t fascinate this old bond guy, but there was an interesting table:

Jobs, jobs, jobs!

The Canadian economy enjoyed a burst of hiring activity for the second consecutive month in October, offsetting summer job losses and bolstering calls that the Bank of Canada is done cutting interest rates for now.

The labour market added 67,000 jobs last month and the unemployment rate fell to 6.9 per cent from 7.1 per cent, Statistics Canada said Friday in a report. Financial analysts were expecting a small loss of 5,000 positions.
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The odds are slim that the Bank of Canada will cut interest rates at its next decision on Dec. 10. Interest rate swaps, which capture market expectations of monetary policy, are pricing in a 5-per-cent chance of a reduction next month, down from 13-per-cent odds on Thursday, according to Bloomberg data.
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There were, however, some weak spots in Friday’s report. The entirety of October’s job gains were in part-time work, and most industries shed positions during the month. Statscan noted that from January to October, employment in goods-producing industries has fallen by 54,000, largely because of losses in construction and manufacturing.

Fitch doesn’t think much of the federal budget:

Combined with sizable non-budgetary financing needs (mainly support of enterprise crown corporations), the higher deficits will substantially increase general government gross debt (GGGD), which we forecast to reach 91.8% of GDP in 2025 from 88.6% in 2024, before accelerating to 98.5% by 2027, nearly double the forecast ‘AA’ median of 49.6%.
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However, despite the government’s Comprehensive Expenditure Review and substantial increase in capital expenditure, the budget only proposes to cut CAD60 billion in spending over five years, the bulk of which comes from civil service reductions of around 10%. Key social programs established under former Prime Minister Justin Trudeau, such as PharmaCare, will be protected.

Provincial operating transfers are left untouched, and the provinces stand to gain from the government’s investment priorities—both directly, through higher capital transfers for key infrastructure projects, and indirectly, through economic activity triggered by expanded investments. However, rising central government debt could weigh on provincial debt metrics Fitch tracks, particularly if near-term economic gains fail to materialize.

Where’s Officer Bubbles when you need him?

Sean C. Dunn, the man who pitched a sandwich at the chest of a federal agent in an unintentionally viral act of opposition to President Trump’s law enforcement policies in Washington, was acquitted on Thursday after a jury found him not guilty of misdemeanor assault.

The verdict, which arrived after roughly seven hours of deliberation, capped a nearly three-month effort to penalize Mr. Dunn for the August outburst and the resulting chase to arrest him. The government had previously failed to persuade a grand jury to charge him with a felony.

It marked a significant setback for Jeanine Pirro, the U.S. attorney in Washington, who made Mr. Dunn’s case a centerpiece of Mr. Trump’s aggressive policing and prosecution strategy in the city. Washington residents have now twice rejected the government’s case against Mr. Dunn, after they refused to indict others caught up in the president’s crackdown.

The jury determined that the launching of the 12-inch deli sandwich from what the government described as “point-blank range” was not an attempt to cause bodily injury, preventing a conviction.

Interesting piece on a policy response to low CPP deferral rates:

Few realize that by waiting until age 70, retirees can more than double their monthly pension compared with taking it at 60. Delaying CPP or QPP is like buying a secure, inflation-protected, government-backed pension at half price – a deal unmatched in the private market. It protects against the two greatest financial fears in retirement: inflation and running out of money.

Yet nine out of ten Canadians still claim by 65, even when they don’t need the money. The result: The average person gives up roughly $100,000 in lifetime income by claiming at 60 instead of 70 – about the same as the median RRSP savings at retirement.
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In a research paper series on how to improve CPP/QPP decisions that I co-authored with Doug Chandler, Barbara Sanders and Alyssa Hodder at the National Institute on Ageing, we found that for those who can afford to wait, the main reason for claiming early isn’t financial – it’s fear.

To most people, delaying CPP or QPP feels like a gamble with death: “If I die soon, I’ll get nothing.” That short-term fear overwhelms the far greater long-term risk of outliving one’s savings.
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That’s why I developed the Pension Delay Guarantee, a simple, low-cost reform that flips the psychology of fear on its head.

Here’s how it works: If someone delays CPP/QPP past 60 but dies before the higher benefits “catch up,” their estate receives a one-time payment for the missed amount.

In plain language: If you delay and die early, the guarantee ensures you don’t lose out.
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Similar pension programs show that introducing a modest death benefit is the turning point in encouraging people to choose higher, lifelong income streams. The cost is minimal – just pennies on the dollar, because few people die before the breakeven age.

It’s an interesting idea. I’ve been tossing around the idea about writing a piece for PrefLetter next spring on CPP deferral and if I do I’ll see if I can fit in a section on this idea. Clearly, the most idiotic investment metric ever invented is the “break-even date” for CPP deferral and only shows just how innumerate the average Canadian is. I mean, why not just stick your CPP monthly payment (that you wouldn’t have received if you had used it to increase your subsequent payments) under a mattress? Then your break-even date is today, so it must be a fantastic investment, right? But I have been sharply criticized in the Globe comments section for describing the metric as garbage.

I don’t really like the idea of a ‘breakeven death benefit’ in principal. It detracts from the purpose of the pension: to provide money for the rest of your life, no ifs, ands, or buts; providing a breakeven guarantee will mean less money for the rest of your life. But in matters of public policy, principle must defer to pragmatism. Earnestly educating people about how numbers work won’t do anything. Helping Little Johnny check under the bed for monsters and guaranteeing that there aren’t any just might.

The Boston Fed has released a working paper by lizabeth Llanes, Jeffrey P. Thompson, and Alice Henriques Volz Do the Rich Really Save More? Answering an Old Question Using the Survey of Consumer Finances with Direct Measures of Lifetime Earnings and an Expanded Wealth Concept:

To address the question of whether the “rich”—typically identified as households with high levels of lifetime income or earnings—save a greater share of their income compared with less affluent households, this paper includes direct measures of lifetime earnings, the full range of assets that low- and middle-income households depend on to finance their retirement, and data that include sufficient samples of households that are in the extreme upper tails of the wealth or income distribution. Specifically, the authors use the 2022 Survey of Consumer Finances (which oversamples high-net-worth households) in combination with direct estimation of lifetime earnings (LE) to explore wealth-to-lifetime-earnings ratios—the cumulative impact of saving over time—across the lifetime earnings distribution. In addition, they use an expanded measure of wealth that includes the asset value of defined benefit pensions and Social Security.
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• As indicated by wealth-to-LE ratios, the rich do indeed save more than households further down the LE distribution. In general, elevated wealth-to-LE ratios are consistently observed only in the top one or two deciles of the lifetime earnings distribution.
• When the analysis includes defined benefit assets, which are excluded from most of the previous research, wealth-to-LE ratios rise even higher in the top half of the LE distribution.
• Adding the asset value of Social Security benefits, however, pulls these ratios up disproportionately across the bottom half of the LE distribution.
• When accumulated capital gains are excluded from the measure of wealth, wealth-to-LE ratios remain elevated in the top decile of LE distribution and are flat over most of the distribution.

TXPR closed at 693.26, up 0.72% on the day. The close was a new 52-week high, smashing the old mark of 689.37 set yesterday. Volume today was 1.14-million, near the median of the past 21 trading days. Today’s run-up was probably due to reinvestment of proceeds from the TD.PF.E redemption.

CPD closed at 13.74, up 0.44% on the day. Volume was 49,350, near the median of the past 21 trading days.

ZPR closed at 12.08, up 0.17% on the day. Volume was 145,110, third-highest of the past 21 trading days.

Five-year Canada yields were down a bit to 2.70%.

The New York Fed published its Household Debt and Credit Report (25Q2):

Household Debt Reaches $18.39 Trillion in the Second Quarter; Auto Loan Originations Increase

Total household debt increased by $185 billion to hit $18.39 trillion in the second quarter, according to the latest Quarterly Report on Household Debt and Credit. Mortgage balances grew by $131 billion and totaled $12.94 trillion at the end of June. Auto loan balances also increased, rising by $13 billion to reach $1.66 trillion. The pace of mortgage originations increased slightly, with $458 billion in newly originated mortgages in the second quarter. HELOC balances rose by $9 billion to $411 billion, representing the thirteenth consecutive quarterly increase. Student loan balances edged up by $7 billion and stood at $1.64 trillion, with student loans seeing another uptick in the rate at which balances moved from current to delinquent due to the resumption of reporting of delinquent student loans. Aggregate delinquency rates remained elevated in the second quarter, with 4.4 percent of outstanding debt in some stage of delinquency.
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Mortgage balances shown on consumer credit reports grew by $131 billion during the second quarter of 2025 and totaled $12.94 trillion at the end of June. Balances on home equity lines of credit (HELOC) rose by $9 billion, the thirteenth consecutive quarterly increase. There is now $411 billion in outstanding HELOC balances, $94 billion above the low reached in the first quarter of 2022. Credit card balances rose by $27 billion during the second quarter and now total $1.21 trillion outstanding and are 5.87% above the level a year ago. Auto loan balances rose by $13 billion, and now stand at $1.66 trillion. Other balances, which include retail cards and consumer finance loans, were roughly unchanged at $540 billion. Student loan balances edged up by $7 billion and now stand at $1.64 trillion. In total, non-housing balances increased by $45 billion, a 0.9% increase from 2025Q1.