Month: October 2025

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.

The TXPR Price Index set a new 52-week high today of 688.00, beating the prior mark of 686.47 set yesterday.

A CNN piece on flagjacking brought to mind a cultural difference between the US and Canada:

[Canadian content creator and author Stewart] Reynolds’ offers a broader overview about the differences between Canadian and American travelers abroad, first with a disclaimer, then with a weather analogy.

“Canada’s got jerks. We’ve got a lot of jerks,” he tells CNN. “But on the whole, I think that Canadians generally try to find the best for the group, whereas Americans are very much for the individual.”

That might mean going to the back of the line instead of trying to find a shortcut, and waiting for their turn. Because Canadians value order, he says.

This characteristic goes a long way to explaining the productivity difference between the US and Canada that is attracting so much media attention lately.

My impression of the difference between US and Canadian business lies largely in how decisions get made. At a Canadian brokerage, for example, if you have a new idea for a product (a derivative, say, or a trading strategy) you’ve got to get the signatures of 10 Executive Vice Presidents before anything can happen – Canada operates by consensus and we wouldn’t want to make a mistake, would we? The US idolizes the Lone Hero. At a US brokerage, if you have a similar idea you go to your boss and if he likes it, then you’ve got X-million in firm capital to get the thing running. The deal is: if it works, you get rich. If it doesn’t work, you get fired. And your boss is hoping you’ll come up with something worth backing, because he has access to 10X-million in firm capital and if there’s one biblical incident that Americans are familiar with, it’s the Parable of the Talents.

On another note, Texas is suing over Tylenol:

Texas Attorney General Ken Paxton has filed a lawsuit against the companies Johnson & Johnson and Kenvue, claiming that they “deceptively” marketed Tylenol to pregnant mothers and that the medication is tied to an increased risk of autism. Kenvue said in a statement that the medication is safe and the company will “vigorously defend” against the claims.

The lawsuit, dated Monday and filed in the District Court of Panola County, Texas, comes about a month after President Donald Trump publicly claimed that the use of Tylenol during pregnancy can be associated with an increased risk of autism in the child, despite decades of evidence that the medication is safe.

“Big Pharma betrayed America by profiting off of pain and pushing pills regardless of the risks. These corporations lied for decades, knowingly endangering millions to line their pockets,” Paxton, the state’s Republican attorney general, who is also running for US Senate, said in a news release Tuesday. “By holding Big Pharma accountable for poisoning our people, we will help Make America Healthy Again.”

The lawsuit claims that Johnson & Johnson and Kenvue violated the Texas Deceptive Trade Practices-Consumer Protection Act because they knew that acetaminophen, the active ingredient in Tylenol, “is dangerous to unborn children and young children” and “they hid this danger and deceptively marketed Tylenol as the only safe painkiller for pregnant women,” according to the lawsuit.

I’m more or less pleased to see this, although it betrays lamentable governance. It will be lots of fun to see this thrashed out in a court of law, where all of the bluster of Trump & Kennedy will be shut down and a judge will be in a position to ask a relatively rare question nowadays: “What evidence do you have for this claim?”. I can just imagine the witnesses for the defence – I’m sure big names in medicine will be lined up for miles to testify on this.

The TXPR Price Index set a new 52-week high today of 686.47, erasing the prior mark of 685.28 set on Friday.

The TXPR Price Index set a new 52-week high today of 685.28, well above the prior mark of 683.66 set yesterday.

US inflation was not as bad as feared:

• • The September CPI inflation report showed that prices rose at a slower-than-expected rate of 0.3% last month, but annual price hikes for a range of consumer goods rose to the fastest pace so far this year.
• • Wall Street responded positively to the data, since it likely does not derail the Federal Reserve’s plans to continue cutting interest rates.
• • This is the first and only piece of official economic data the federal government has released this month, due to the shutdown. Some employees at the Bureau of Labor Statistics returned to work in order to produce the report, since it is needed to assess key cost-of-living adjustments for Social Security recipients.
• • Economists predicted the data would show that annual inflation ticked up in September to 3.1% from 2.9% in August and rose 0.4% on a month-to-month basis.

Meanwhile, it seems that the big US automakers do not believe there should be tariffs on their products:

Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, which represents GM, Stellantis and Ford Motor Co. in Canada, called Canada’s retaliation “an unforced error at the worst possible time.”
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In an interview, Mr. Kingston said manufacturers facing remissions rules would rather export cars to Canada than build them here and risk being hit with tariffs.

“This is completely eroding our competitiveness right now for manufacturing,” Mr. Kingston said. “The tariff regime plus the EV mandate, now we have legal threats being levied to companies. It is virtually impossible to imagine a scenario where someone is looking at new investments in Canada under this framework.”

Suck it up, boys! We’ll be happy to buy cars made domestically, in Mexico, or imported from countries who practice freer trade – the US is welcome to go back to the 1960s and early 1970s, when import restrictions meant the Big 3 could get away with making crap cars for a long time, only to have their lunch eaten when a relaxation of those restrictions allowed the Japanese to take over the trade.

The dollar got hit on trade worries:

The Canadian dollar weakened against its U.S. counterpart on Friday as trade negotiations between Ottawa and Washington broke down and markets looked ahead to an expected Bank of Canada interest rate cut next week.

The loonie was trading 0.2% lower at 1.4015 per U.S. dollar, or 71.35 U.S. cents, after moving in a range of 1.3975 to 1.4039. For the week, the currency was nearly unchanged.

U.S. President Donald Trump is frustrated with Canada over trade negotiations that have not been going well, White House economic adviser Kevin Hassett said after Trump cut off trade talks between the two countries.

Well … that’s the official line. Walking out in a huff is an integral part of Trump’s dealmaking, so I’d say the latest kerfuffle has been long-planned, only awaiting a plausible trigger.

This time the plausible trigger was an Ontario ad quoting Reagan:

U.S. President Donald Trump has ended trade talks with Canada over an Ontario government anti-tariff advertising campaign running in the United States, prompting Premier Doug Ford to pull the ad at the request of Prime Minister Mark Carney.

The abrupt break in negotiations follows mounting White House frustration with Ottawa, which so far hasn’t agreed to the sort of punitive trade deal that other U.S. trading partners have accepted.

Mr. Trump became annoyed Thursday night at the ad, which features archival footage of late former U.S. president Ronald Reagan, a revered figure among Mr. Trump’s Republicans, warning that tariffs are economically disastrous.

In Truth Social posts Thursday and Friday, the U.S. President declared that “ALL TRADE NEGOTIATIONS ARE HEREBY TERMINATED,” incorrectly claimed that Mr. Reagan “LOVED TARIFFS,” and accused Canada of “trying to illegally influence the United States Supreme Court” on a coming case over Mr. Trump’s levies.

In a statement Friday afternoon, Mr. Ford said the ad would run as planned over the weekend – including during the first two games of baseball’s World Series between the Toronto Blue Jays and the Los Angeles Dodgers – but would no longer air as of Monday.

We can thank Trump, though, for making sure everybody knows about the ad and its contents. A variation of the Streisand Effect?

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.