Category: Market Action

The TXPR Price Index hit a new 52-week high today of 683.66, edging the prior mark of 683.50 set yesterday.

It’s nice to see some meaningful retaliation:

The federal government is firing back at Stellantis and General Motors by limiting the number of tariff-free vehicles the automakers can import from the U.S. to sell in Canada, CBC News has learned.

The two multinational manufacturers will no longer be exempt from paying Canada’s retaliatory tariffs on as many U.S.-assembled vehicles as before, sources said.

The move is expected to put pressure on the companies to reinvest in Canadian production and workers to get this benefit back and avoid a big tariff bill.
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Effective immediately, the government is reducing the amount of American-assembled vehicles GM can import tariff-free by 24 per cent and cutting Stellantis’s amount by 50 per cent, sources said.

Yup. Let automakers import from the States at preferential tariff rates only as much as they export to the States. There are lots of other automakers from free-trade countries who will be happy to pick up any slack there might be.

The TXPR Price Index set a new 52-week high of 683.50 today, beating the old mark of 682.97 set yesterday.

PerpetualDiscounts now yield 5.61%, equivalent to 7.29% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.73% on 2025-10-22, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained at the 255bp reported [belatedly] October 15.

The TXPR Price Index set a new 52-week high today, of 682.97 vs. the old mark of 682.28 set 2025-10-9.

Canadian inflation ticked up:

The Consumer Price Index rose 2.4 per cent in September on an annual basis, up from August’s 1.9-per-cent pace, Statistics Canada said Tuesday. Financial analysts had expected inflation to land at 2.2 per cent. On a monthly basis and adjusted for seasonality, prices rose 0.4 per cent.

The CPI results were heavily influenced by fluctuations in fuel costs. Year over year, gasoline prices fell by 4.1 per cent in September, but that was less than a 12.7-per-cent decline in August, putting upward pressure on headline inflation.

Excluding gas, consumer prices have risen by 2.6 per cent over the past year, up from 2.4 per cent in August.

After the CPI report, investors were pricing in a 66-per-cent chance that the Bank of Canada cuts interest rates by a quarter-point on Oct. 29, according to Bloomberg data. That’s down from 75-per-cent odds before the report.
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Inflation has picked up in various categories. For example, grocery prices have risen by 4 per cent over the past year, and growth has been trending higher since April, 2024. Statscan noted that several items – including beef and coffee – have contributed to the upturn.

Still, there are signs that Canada isn’t facing a reignited inflation crisis. The Bank of Canada’s core measures of inflation – which strip out volatile movements in the CPI – rose by an annual average of 3.15 per cent in September, a tad higher than 3.1 per cent in August.

The market responded:

Here, in detail, is how implied probabilities of future interest rate moves stood in swaps markets after the 830 am ET inflation report. The current overnight rate is 2.50%, where it has stood since Sept. 17. While the bank moves in quarter-point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves.

Pre-announcement

Post-announcement

The terminal rate edged up to 2.11% from 2.06%.

There is, of course, a lot of commentary on social media about housing prices, most of it generated by partisans who assume that the Prime Minister is responsible for every inconvenience in life. Here’s what’s being said in the States:

In the past few weeks, President Trump has blamed America’s largest homebuilders for the country’s housing affordability woes. In a social media post this month, Trump compared homebuilders to oil cartel OPEC, accusing them of sitting on empty lots to keep home prices artificially high.
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Yet builders and economists say this supply shortage isn’t caused simply by builders sitting on empty lots. They say that building new homes has only gotten harder, slowed by regulation, labor shortages and high financing costs.
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A study from the National Association of Homebuilders (NAHB) found that nearly 25% of the price of a typical newly built single-family home is due to regulations imposed by state, local and federal governments. The NAHB has lobbied against what it calls “regulatory burdens” around building homes.

If land-use regulations were relaxed, an extra 2.5 million more housing units would likely be added over the next decade — eliminating about two-thirds of the estimated housing shortage, according to an analysis by Goldman Sachs.

The analysis also noted that large-scale reform would be “challenging” to implement because most regulations are set at the local level.
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Oren Amir, founder of Go Home Builders in Los Angeles, said some of his rebuilding projects in Altadena, where residential areas were destroyed by January’s wildfires, have been delayed by conflicting guidance from the city on rooftop solar panel requirements.
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For example, California Gov. Gavin Newsom, a Democrat, recently signed a bill that overrides local zoning by allowing for more density near transit stops in some California counties. Montana Gov. Greg Gianforte, a Republican, has also enacted laws aimed at increasing housing supply and cutting red tape.

But it’s not only governments that slow projects down. There is often community resistance that stalls the building of homes.

That NIMBY, or “not in my back yard,” opposition is driven by a range of concerns, from overcrowding to worries about radically changing the character of communities.

NIMBY concerns are a leading obstacle to adding more housing supply, Donovan said. “We’ve got to get communities to understand we’re not talking building skyscrapers,” he said.

My views on “land use regulations” depend on what precisely is meant. If the regulations (or zoning bylaws, if you consider that different) say ‘you can’t build towers near subways stops or on arterial roads and you can’t build modest apartment buildings in residential neighborhoods’ – then I oppose such regulations. If they say ‘you can’t build sprawling suburbs on greenbelt‘ then I’m all in favour.

Trump’s lost another nominee, but what amused me was his lawyer’s defence of some very dubious social media posts:

“Looks like these texts could be manipulated or are being provided with material context omitted. However, arguendo, even if the texts are authentic, they clearly read as self-deprecating and satirical humor making fun of the fact that liberals outlandishly and routinely call MAGA supporters ‘Nazis,’” Paltzik first told Politico.

I love it! “Could be” and “arguendo” (Fancy Talk meaning ‘for the sake of an argument’)! He said absolutely nothing at all, made no claims whatsoever, but it sounded good!

Investment Executive had a piece on the preferred share market:

Since the preferred market is less liquid than some other types of fixed-income, “the capacity or the potential to outperform the benchmark is higher,” said the Montreal-based [Dynamic Funds’ Marc-André] Gaudreau [vice-president and senior portfolio manager of Dynamic Active Preferred Shares ETF.], whose ETF is one of the category’s best performers and has a five-star Morningstar rating.

Other actively managed funds that have outperformed their peer group include Global X Active Preferred, NBI Active Canadian Preferred Shares ETF and TD Active Preferred Share ETF.

“The other thing that’s very important is the flexibility in our mandate. We don’t have to be fully invested in the $25-par pref market in Canada,” Gaudreau said. “We can go to the U.S. We can go to the institutional preferred share market.” LRCNs and hybrids are also held in the Dynamic portfolio.

For his part, Fiera’s Normandeau is above market weight in rate-reset preferreds versus the fixed-rate perpetuals. Among the rate reset issues, he favours those with low- to mid-reset yields that are trading at discounts. These securities, along with having capital gains potential, are less likely to be called away by issuers.

The Global X portfolio also emphasizes high credit quality, Normandeau said. “In this environment right now, you’re not really paid to go to a weaker credit name.”

As it happens, I track all four of the active ETFs managed as part of my MAPF performance reporting – so you can check out how I did against them as of the end of September.

Thanks to Assiduous Reader A for bringing this to my attention!

PerpetualDiscounts now yield 5.62%, equivalent to 7.31% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.78% on 2025-10-8, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained at increased to 255bp from the 245bp reported October 8.

Powell spoke on quantitative tightening today:

Federal Reserve Chair Jerome Powell on Tuesday suggested the central bank is nearing a point where it will stop reducing the size of its bond holdings, but gave no long-run indication of where interest rates are heading.

Speaking to the National Association for Business Economics conference in Philadelphia, Powell provided a dissertation on where the Fed stands with “quantitative tightening,” or the effort to reduce the more than $6 trillion of securities it holds on its balance sheet.

While he provided no specific date of when the program will cease, he said there are indications the Fed is nearing its goal of “ample” reserves available for banks.

“Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell said in prepared remarks. “We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision.”
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On a related matter, Powell noted concerns over the Fed continuing to pay interest on bank reserves.

The Fed normally remits interest it earns from its holdings to the Treasury general fund. However, because it had to raise interest rates so quickly to control inflation, it has seen operating losses. Congressional leaders such as Sen. Ted Cruz, R-Texas, have suggested terminating the payments on reserves.

However, Powell said that would be a mistake and would hinder the Fed’s ability to carry out policy.

“While our net interest income has temporarily been negative due to the rapid rise in policy rates to control inflation, this is highly unusual. Our net income will soon turn positive again, as it typically has been throughout our history,” he said. “If our ability to pay interest on reserves and other liabilities were eliminated, the Fed would lose control over rates.”

Jobs, jobs, jobs!

Canada’s economy posted a surprise 60,400 net job gains in September, almost entirely reversing the losses of the previous month, data showed on Friday, but was not enough to bring down its multiyear high unemployment rate.

The jobless rate was at 7.1 per cent, same as the prior month when the rate hit a nine-year high outside of the pandemic years.
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The employment increase in September was completely led by full-time work and it increased in 10 out of 16 industry groups, Statscan said.
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The unemployment rate among youth or those in the age bracket of 15 to 24 years edged up to 14.7 per cent in September, the highest rate in 15 years. The youths represent around 14 per cent of the total labour force in Canada.

Also, the proportion of people working in jobs which are unrelated to their qualification as well as immigrants who were overqualified for their jobs scaled up, reflecting tough labour market conditions, the statistics agency said.
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The average hourly wage of permanent employees – a gauge closely tracked by the Bank of Canada to ascertain inflationary trends – grew by 3.6 per cent in September on a yearly basis to $37.87, same percentage increase as last month.

So, the market reacted:

Here, in detail, is how implied probabilities of future interest rate moves stood in swaps markets after the jobs report. The current overnight rate is 2.50 per cent. While the bank moves in quarter-point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves.

Pre-announcement

Post-announcement

It is interesting to see that the changes are hawkish in the near term and dovish in the longer term, with the projected terminal rate declining from 2.23% to 2.18%.

Meanwhile, The Stable Genius re-ignited the trade war with China:

President Donald Trump said Friday he would impose a 100% tariff on China “over and above any Tariff they are currently paying” effective November 1 – massively escalating his trade war amid a heated dispute over export controls on rare earths.

In a Truth Social post, Trump wrote that China had “taken an extraordinarily aggressive position on Trade in sending an extremely hostile letter to the World, stating that they were going to, effective November 1st, 2025, impose large scale Export Controls on virtually every product they make, and some not even made by them.”

“This affects ALL Countries, without exception, and was obviously a plan devised by them years ago,” he wrote. “It is absolutely unheard of in International Trade, and a moral disgrace in dealing with other Nations.”

Trump said he would impose the new tariff November 1 “or sooner, depending on any further actions or changes taken by China.”

Earlier in the day, Trump had blasted Chinese leader Xi Jinping on social media over China’s ramped-up efforts to impose export controls on critical rare earths, threatening economic retaliation and saying he no longer sees any reason to meet with Xi during a scheduled visit to the region later this month. At the time, Trump also threatened economic penalties against China, warning, “Dependent on what China says about the hostile ‘order’ that they have just put out, I will be forced, as President of the United States of America, to financially counter their move.”

“For every Element that they have been able to monopolize, we have two,” he added.

… and markets reacted to that:

The S&P 500 sank 2.7% and the S&P/TSX Composite Index dropped 1.4% in their worst day since April. The Dow Jones Industrial lost 1.9%, and the Nasdaq composite fell 3.6%.

Stocks had been heading for a slight gain in the morning, until Trump took to his social media platform and said he’s considering “a massive increase of tariffs” on Chinese imports.
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The S&P/TSX composite index ended down 414.09 points at 29,850.89, its lowest closing level since September 26. For the week, the index was down 2%.

The TSX has advanced 20.7% since the start of the year and posted a record closing high as recently as Monday.

The high-flying TSX technology sector dropped 4.3%, with shares of e-commerce company Shopify Inc dropping 8%.

The TSX energy sector was down 3.3%. Some of Friday’s strongest action was in the oil market, where the price of a barrel of benchmark U.S. crude sank 4.2% to US$58.90. It fell as a ceasefire between Israel and Hamas came into effect in Gaza. An end to the war could remove worries about disruptions to oil supplies, which had kept crude’s price higher than it otherwise would have been. Trump’s tariff threat could gum up global trade and lead the economy to burn less fuel.
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In the absence of official data, investors looked to the U.S. Federal Reserve for clues regarding near-term interest rate cuts. Fed Governor Christopher Waller said that while private employment data continues to show labor market weakness, the central bank should act with caution when reducing the Fed funds target rate as it evaluates the economy. St. Louis Fed President Alberto Musalem echoed that sentiment, saying that another rate cut could be warranted as insurance against a weakening labor market. “I believe that we have to tread with caution” before monetary policy becomes too accommodative, he said.

The TXPR Price Index hit a new 52-week high today of 682.28, replacing the old mark of 681.80 set yesterday.