Category: Market Action

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.

The TXPR Price Index set a new 52-week high today of 689.37, beyond the old mark of 688.35 set yesterday.

The TXPR Price Index set a new 52-week high today of 688.35, erasing the old mark of 688.00 set yesterday.

Five-year Canadas were up 12bp to 2.74%, presumably on the perceived hawkish tone of Tiff Macklem’s post rate-announcement comments.

The FOMC loosened policy:

Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.

In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee decided to conclude the reduction of its aggregate securities holdings on December 1. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller. Voting against this action were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting, and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.

Colby Smith of the NYT remarks:

• Lower rates: After another quarter-point cut, interest rates set by the Fed are now below 4 percent for the first time since late 2022. Jerome H. Powell, the Fed’s chair, said today’s reduction moved the Fed’s policy settings closer to a “neutral” level that does not stimulate growth or slow it down. That suggests there may not be that much more scope for the central bank to cut interest rates further.
• Room for debate: This remains a very divided Fed, as evidenced by the fact that two officials cast dissenting votes in opposite directions. One wanted a bigger, half-point cut; another wanted no cut at all. The split stems not only from divergent forecasts about the economy but also risk tolerances around allowing the labor market to weaken or inflation to stay elevated.
• Uncertainty ahead: Mr. Powell made clear that the disagreements extended to the path forward for policy, with a cut at the December meeting not a “foregone conclusion” in light of “strongly differing views about how to proceed.” The Fed chair also said that a lack of official government statistics as a result of the ongoing shutdown could make the central bank more cautious about further cuts.
• Risky choices: Mr. Powell repeatedly emphasized what a challenging situation the Fed was in, reiterating that there was “no risk-free path.” If it keeps cutting to protect the labor market, inflation could get stuck above the Fed’s 2 percent target. If it focuses on getting inflation down, it could cause a more significant increase in unemployment.
• New balance: Mr. Powell also said the Fed was thinking carefully about its balance sheet, which the central bank said it would stop shrinking in December. He said that market strains that have cropped up in the past three weeks have shown that now is the right time to make that change.

PerpetualDiscounts now yield 5.52%, equivalent to 7.18% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.67% on 2025-10-28, and the closing price of ZLC changed from 15.72 on that date to 15.58 on 2025-10-29, a drop of 1.65%. This drop in ZLC price implies an increase in yield of 13bp (BMO does not specify whether their reported “Duration” of 12.44 is Macaulay or Modified; I will assume Modified) to 4.80%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed sharply to 240bp from the 255bp reported October 22.