PrefBlog

Inflation does not appear to be a problem:

Although two of the Bank of Canada’s measures of core inflation remained above 2 per cent, CPI common – which the central bank says is the best gauge of the economy’s underperformance – was unchanged at 1.8 per cent.

Energy prices fell 4.1 per cent year-over-year in June as Canadians paid less for gasoline and other fuels. Oil prices dipped amid rising U.S. fuel inventories and the elimination of carbon pricing in Alberta.

But consumers are paying more for other products – notably fresh vegetables, where prices jumped 17.3 per cent, the largest increase seen since January, 2016. The rise, which follows a similar gain in May, was owing in part to inclement weather in agricultural regions.

But bond prices were up:

At 3:16 p.m., the Canadian dollar was trading 0.3 per cent higher at 1.3045 to the greenback, or 76.66 U.S. cents. The currency, which last Friday notched a near nine-month high at 1.3018, traded in a range of 1.3035 and 1.3093.

The gain for the loonie came even as the price of oil, one of Canada’s major exports, fell for the third straight day after U.S. government data showed large builds in refined product stockpiles. U.S. crude futures settled 1.5 per cent lower at $56.78 a barrel.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries after data showed weakness in the U.S. housing market and as concerns about the trade war between the United States and China boosted demand for safe-haven debt.

The two-year rose 6 cents to yield 1.527 per cent and the 10-year was up 48 cents to yield 1.535 per cent.

The 10-year yield touched its lowest intraday since July 5 at 1.532 per cent.

The Canada 5-Year yield was down 6bp to 1.45%.

PerpetualDiscounts now yield 5.57%, equivalent to 7.24% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.43%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 380bp, a slight (and perhaps spurious) widening from the 375bp reported July 10.

This entry was posted on Thursday, July 18th, 2019 at 1:52 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.