Fitch has joined the the cooling housing market bandwagon:
Canadian home sales activity slowed in August, due in part to steps taken by the government to tighten mortgage lending standards, which took effect in July. In Fitch Ratings’ view, these early signs of a cooldown in the housing market could be generally positive for the stability of the Canadian banking system and the sustainability of economic growth, though the full extent and pace of the housing correction remains unclear.
…
Although a correction in housing prices and a slowdown in residential construction spending would have some negative effects on economic growth in the near term, the introduction of more stringent mortgage regulations should help limit the impact of excess leverage on mortgage performance and bank balance sheets.Reduced near-term risks of a housing bubble are likely to ease pressure on the Bank of Canada to tighten monetary policy, supporting the economic outlook at a time when weakening global growth and monetary stimulus in the U.S. would make it very difficult for the central bank to tighten credit conditions. Our current base case assumes that Canadian growth will remain steady at 2.2% annually through 2014.
But it takes two to make a market!
Get ready for a Canadian housing crash.
That’s the forecast from the folks at research firm Capital Economics, who say the collapse in house prices will feed into economic weakness and cause the Bank of Canada to back track on its insistence that the next move in domestic interest rates will be up.
“Home sales have slumped in recent months, not just in response to the tightening of mortgage lending standards. We fear this adjustment is only just starting and anticipate that the resulting excess supply of homes for sale will eventually drive home prices down by as much as 25 per cent,” the firm says in a note to clients.
Meanwhile, QE3 is having the intended primary effect:
Mortgage rates for 30-year U.S. loans tumbled, matching the lowest level on record and keeping borrowing costs down as the real estate market improves.
The average rate for a 30-year fixed mortgage fell to 3.49 percent in the week ended today from 3.55 percent, Freddie Mac said in a statement. It matched a record reached in July. The average 15-year rate slid to 2.77 percent from 2.85 percent, a new low, according to the McLean, Virginia-based company.
Low borrowing costs, spurred in part by the Federal Reserve’s purchase of mortgage securities, have aided a housing-market recovery after the worst downturn since the 1930s. Sales of existing homes climbed to a two-year high in August, the National Association of Realtors reported yesterday. Single-family housing starts rose to the fastest annual rate since April 2010, the Commerce Department said.
Unauthorized trading or unauthorized losses?
Kweku Adoboli’s lawyers said UBS AG had a culture that overlooked trading limits and other rules as long as employees made money.
Adoboli lawyer Charles Sherrard said the bank became “more aggressive in terms of its desire to make profits” in 2011, while cross-examining one of Adoboli’s former bosses at a fraud trial in London today.
IOSCO has found another regulatory job-creation rationale:
The same lack of oversight that enabled traders to manipulate the London interbank offered rate plagues other benchmarks around the globe, according to a group of international securities regulators.
Fewer than half of the benchmark interest rates surveyed in the U.S., Europe and Asia were based on actual transactions, according to a confidential International Organization of Securities Commissions discussion paper obtained by Bloomberg News. Instead, the rates were calculated by methodologies that were unclear, not transparent and only rarely subject to specific regulatory standards or obligations, the group said.
It was an uneven day for the Canadian preferred share market, with PerpetualPremiums up 11bp, FixedResets winning 12bp and DeemedRetractibles flat. Volatility was muted but uniformly positive. Volume was low.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1146 % | 2,435.1 |
| FixedFloater | 4.53 % | 3.89 % | 33,260 | 17.48 | 1 | 0.2392 % | 3,510.8 |
| Floater | 3.01 % | 3.02 % | 58,405 | 19.68 | 3 | -0.1146 % | 2,629.3 |
| OpRet | 4.66 % | 3.34 % | 54,434 | 1.46 | 4 | 0.3567 % | 2,550.6 |
| SplitShare | 5.46 % | 4.97 % | 73,122 | 4.58 | 3 | -0.0398 % | 2,810.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3567 % | 2,332.3 |
| Perpetual-Premium | 5.29 % | 3.00 % | 90,711 | 1.03 | 28 | 0.1080 % | 2,286.0 |
| Perpetual-Discount | 4.95 % | 4.93 % | 96,810 | 15.63 | 3 | 0.0834 % | 2,549.4 |
| FixedReset | 4.96 % | 3.12 % | 174,546 | 3.87 | 72 | 0.1226 % | 2,431.2 |
| Deemed-Retractible | 4.95 % | 3.52 % | 120,914 | 2.35 | 46 | -0.0043 % | 2,368.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.A | Deemed-Retractible | 1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.16 % |
| CU.PR.C | FixedReset | 1.01 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.92 Bid-YTW : 3.22 % |
| FTS.PR.E | OpRet | 1.25 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.68 Bid-YTW : -0.05 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| FTS.PR.F | Perpetual-Premium | 217,166 | Desjardins crossed 64,900 at 25.89, then blocks of 80,000 and 68,100 at 25.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-01 Maturity Price : 25.50 Evaluated at bid price : 25.86 Bid-YTW : 3.83 % |
| ENB.PR.P | FixedReset | 124,202 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-09-20 Maturity Price : 23.08 Evaluated at bid price : 24.97 Bid-YTW : 3.85 % |
| RY.PR.L | FixedReset | 118,703 | TD crossed blocks of 48,400 and 50,000 at 26.17; RBC crossed 20,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.17 Bid-YTW : 2.55 % |
| CM.PR.E | Perpetual-Premium | 108,011 | RBC crossed 100,000 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.98 Bid-YTW : -20.60 % |
| MFC.PR.A | OpRet | 104,692 | Desjardins crossed 49,200 at 25.57; National crossed 50,000 at 25.58. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.34 % |
| CM.PR.K | FixedReset | 103,021 | RBC crossed 100,000 at 26.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.37 Bid-YTW : 2.75 % |
| There were 21 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.H | Deemed-Retractible | Quote: 24.86 – 25.20 Spot Rate : 0.3400 Average : 0.2348 YTW SCENARIO |
| HSB.PR.C | Deemed-Retractible | Quote: 25.56 – 25.94 Spot Rate : 0.3800 Average : 0.2929 YTW SCENARIO |
| BAM.PR.C | Floater | Quote: 17.25 – 17.66 Spot Rate : 0.4100 Average : 0.3259 YTW SCENARIO |
| RY.PR.A | Deemed-Retractible | Quote: 25.68 – 25.90 Spot Rate : 0.2200 Average : 0.1425 YTW SCENARIO |
| BAM.PR.O | OpRet | Quote: 25.28 – 25.82 Spot Rate : 0.5400 Average : 0.4753 YTW SCENARIO |
| BNS.PR.M | Deemed-Retractible | Quote: 25.90 – 26.05 Spot Rate : 0.1500 Average : 0.0914 YTW SCENARIO |