Jobs, jobs, jobs (US Version)!
The economy in March continued its descent from dizzying heights, with employment growing at a healthy rate but one that nonetheless signifies employers are pulling back as steadily rising interest rates take their toll.
Employers added 236,000 jobs last month, the Labor Department reported on Friday, while the unemployment rate decreased to 3.5 percent, from 3.6 percent in February.
The range of industries beginning to fade has widened, as warehousing, retail, manufacturing, construction and financial activities — those more sensitive to borrowing costs — either lost jobs or stayed flat over the month.
…
- Year-over-year growth in average hourly earnings slowed slightly in March, to 4.2 percent, a sign the Federal Reserve has been looking for as it seeks to quell inflation. The report reflected a labor market that is gently decelerating, a sign of the kind of soft economic landing that the Fed has been shooting for.
- The U.S. labor force added nearly half a million workers in March and the share of Americans considered in their prime working age rose to 80.7 percent, the highest rate since 2001. So much for “nobody wants to work anymore.”
- The report delivered welcome news for President Biden, who has said that the job market needed to cool to tame high inflation. But analysts warn that the outbreak of banking sector turmoil means that the coming months could bring a more rapid deceleration in hiring.
- Bond yields jumped in response to the fresh data, as investors added to bets that interest rates would rise. Stock markets were closed on Friday for the Easter holiday but the bond market opened for a shortened session, during which yields continued to record unusually big swings.
So this year’s tussle is between the economists and the players! Who will win?
The Bank of Canada will keep its key interest rate steady at 4.50 per cent through 2023, according to most economists polled by Reuters, with an even smaller minority now expecting an interest-rate cut by year-end than a poll taken a month ago.
Markets still expect more than 50 basis points of cuts, pricing fuelled by fears last month over stresses in the U.S. and European banking sector, despite Canada’s economy and labour market performing better than expected.
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In March, the BoC was the first major central bank to stop its aggressive hiking cycle and is on what it calls a conditional pause. So all 33 economists polled March 31-April 6 said it will hold its overnight rate at 4.50 per cent on April 12.A majority of forecasters, 23 of 31, said the rate would remain unchanged for the rest of 2023. Only seven expected at least one 25-basis-point rate cut by end-year, down from 13 in a survey taken about a month ago.
The IMF has released its Global Financial Stability Report which includes a chapter on Geopolitics and Financial Fragmentation: Implications for Macro-Financial Stability:
Rising geopolitical tensions among major economies have intensified concerns about global economic and financial fragmentation, which could have potentially important implications for global financial stability. Fragmentation induced by geopolitical tensions could affect the cross-border allocation of capital, international payment systems, and asset prices. This could pose macro-financial stability risks by increasing banks’ funding costs, reducing their profitability, and lowering the provision of credit to the private sector. Greater financial fragmentation could also exacerbate capital flow and macro-financial volatility by limiting international risk diversification. Policymakers need to be aware of potential financial stability risks associated with a rise in geopolitical tensions and assess and quantify geopolitical shock transmission to financial institutions. Financial institutions may need to hold adequate capital and liquidity buffers against rising geopolitical risks. The global financial safety net also needs to be buttressed through adequate levels of international reserves held by countries, central bank liquidity swap arrangements, and precautionary credit lines from international financial institutions.
One grudge the private-school boys at the major dealers have against market-making hedge funds is that they pull their capital out of the market when things get hairy. So, it turns out, do private mortgage lenders:
Private mortgage lenders are refusing to renew loans to their existing borrowers, leaving indebted homeowners without a source of funding.
Canadian Mortgages Inc., CMLS Financial, New Haven Mortgage Corp. and individual private lenders are some of those who have turned down requests to renew some of their borrowers’ loans after home prices tanked over this past year.
This is taking place in areas where home prices have dropped significantly. That includes Owen Sound, Bowmanville, Orillia, Timmins, Hamilton and Brampton in Ontario and Prince Rupert in British Columbia.
Private lenders are nervous they won’t be able to recoup their capital if borrowers are unable to make their monthly payments. Private lending is typically determined using a metric called the loan-to-value (LTV) ratio, which measures how much the homeowner owes relative to the appraised value of the property.
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Currently, many private lenders are only willing to lend up to 75 per cent of the property’s value – also known as an LTV ratio of 75 per cent. When home prices were soaring in 2021, private lenders were willing to offer loans with an LTV ratio of 90 per cent.Now that home prices have dropped, that has increased the risk to the lender and they are no longer willing to renew loans. When borrowers try to renew their mortgage, the lender is either refusing to renew their loan or telling borrowers that their properties need to be reappraised. And when the property is reappraised, it has a much lower value.
The New York Fed has released its Survey of Consumer Expectations:
Inflation
- Median inflation expectations increased by 0.5 percentage point at the one-year-ahead horizon to 4.7%, marking the first increase in the series since October 2022. Median inflation expectations increased by 0.1 percentage point at the three-year-ahead horizon to 2.8%, but decreased by 0.1 percentage point at the five-year-ahead horizon to 2.5%. The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) increased at all three horizons.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased at the one-year-ahead horizon, decreased at the three-year-ahead horizon, and remained unchanged at the five-year-ahead horizon.
- Median home price growth expectations increased by 0.4 percentage point to 1.8% in March, remaining far below the 12-month trailing average of 3.0% as well as their pre-pandemic levels. The increase was most pronounced among respondents with no more than a high school education and for those who live in the Midwest Census region.
- Median year-ahead expected price changes declined by 0.1 percentage point for gas (to 4.6%), 1.4 percentage point for food (to 5.9%), 0.1 percentage point for the cost of medical care (to 9.3%), and 0.2 percentage point for the cost of rent (to 9.2%). Median year-ahead expected cost of college education increased by 0.8 percentage point (to 8.9%). All commodity price expectations remain well above their pre-pandemic (March 2020) levels.
Labor Market
- Median one-year-ahead expected earnings growth remained unchanged at 3.0% in March. The series has been moving between a narrow range of 2.8% to 3.0% since September 2021; March marked the fourth consecutive month it remained at 3.0%.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased by 1.3 percentage point to 40.7%. The increase was more pronounced for respondents with at least some college education, those between the ages of 40 and 60, and those with annual household incomes between $50k and $100k.
- The mean perceived probability of losing one’s job in the next 12 months decreased by 0.4 percentage point to 11.4%. The mean probability of leaving one’s job voluntarily in the next 12 months also declined by 1.5 percentage point to 19.3%.
- The mean perceived probability of finding a job (if one’s current job was lost) declined by 0.3 percentage point to 57.6% in March. The series has been moving between a narrow range of 57.2% to 58.2% since August 2022.
Something peculiar is happening at Emerge Canada Inc.:
Regulators have slapped the entire family of exchange-traded funds from Emerge Canada Inc. with a trading halt because the company has failed to find an auditor to review its financial statements.
Toronto-based Emerge revealed in mid-December that, nearly six weeks earlier, BDO Canada LLP had resigned as the auditors of the Emerge Funds. At the time, Emerge said it was “working expeditiously to appoint a successor auditor.”
Monday, Emerge acknowledged it has yet to find a new auditor. Lacking one, it failed to file audited annual financial statements for its funds by a March 31 deadline. As a result, the Ontario Securities Commission issued a cease-trade order on Thursday for all the Emerge funds.
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In its December 14 filing, Emerge said BDO “resigned, on its own initiative” on Nov. 3. Emerge said BDO Canada LLP had no reservations in its reports for the Emerge Funds for the two most recently completed financial years, which were 2020 and 2021. Also, there no were no “reportable events,” which are types of disagreements with auditors or other accounting issues that are defined in securities law.The next day, in a filing to all provincial securities regulators, BDO said “We agree with the statements made in the Change of Auditor Notice pertaining to our firm.”
And we should all Raise a glass to Bing Newcomb:
Mr. Newcomb, who co-founded the company E*Trade and wrote the computer code that made it work, died on Jan. 29 at his home in Palo Alto, Calif. He was 79.
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In 1980, Mr. Newcomb and William A. Porter were introduced by a mutual friend at a Halloween party in Palo Alto. Mr. Porter, a onetime cowboy turned electronics whiz, had just purchased an Apple II personal computer, the company’s first model aimed at consumers. How, he wondered, could he and other individuals use the new technology to buy and sell stocks from home?Mr. Newcomb, who had been working as a freelance computer programmer, hiring himself out to banks and other businesses that needed a guide to emerging digital technologies, provided the answers.
In 1982, with $15,000 in capital, the partners started TradePlus, one of the first electronic trading platforms. Its first trade was made on July 11, 1983, by a Michigan dentist.
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By 1994, revenues had risen geometrically, from $850,000 only two years earlier to nearly $11 million. A business journal proclaimed the firm to be the fastest-growing private company in Silicon Valley. It went public as the E*Trade Group in 1996.Mr. Newcomb, who had been the company’s chief system architect and vice president for research and development, retired with 2.4 million shares of the company in 1997, when the price per share was about $23.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| 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 | -2.3967 % | 2,270.0 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -2.3967 % | 4,353.8 |
| Floater | 9.93 % | 9.90 % | 40,160 | 9.64 | 2 | -2.3967 % | 2,509.1 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1405 % | 3,352.5 |
| SplitShare | 5.01 % | 7.26 % | 44,407 | 2.64 | 7 | -0.1405 % | 4,003.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1405 % | 3,123.8 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0270 % | 2,761.8 |
| Perpetual-Discount | 6.18 % | 6.21 % | 54,153 | 13.60 | 34 | -0.0270 % | 3,011.6 |
| FixedReset Disc | 5.81 % | 7.59 % | 88,688 | 12.15 | 63 | 0.1308 % | 2,121.3 |
| Insurance Straight | 6.09 % | 6.14 % | 73,735 | 13.70 | 19 | -0.2087 % | 2,955.0 |
| FloatingReset | 10.42 % | 10.95 % | 31,083 | 8.85 | 2 | -0.8403 % | 2,394.4 |
| FixedReset Prem | 6.93 % | 6.46 % | 285,741 | 12.96 | 1 | 0.1975 % | 2,333.0 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1308 % | 2,168.4 |
| FixedReset Ins Non | 6.00 % | 7.54 % | 70,333 | 12.04 | 11 | -0.4430 % | 2,298.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BN.PR.B | Floater | -4.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 11.60 Evaluated at bid price : 11.60 Bid-YTW : 10.26 % |
| CU.PR.F | Perpetual-Discount | -4.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 17.99 Evaluated at bid price : 17.99 Bid-YTW : 6.35 % |
| MFC.PR.K | FixedReset Ins Non | -3.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 17.70 Evaluated at bid price : 17.70 Bid-YTW : 7.54 % |
| CU.PR.C | FixedReset Disc | -2.65 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 18.35 Evaluated at bid price : 18.35 Bid-YTW : 7.47 % |
| FTS.PR.H | FixedReset Disc | -1.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 12.45 Evaluated at bid price : 12.45 Bid-YTW : 8.33 % |
| SLF.PR.J | FloatingReset | -1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 14.65 Evaluated at bid price : 14.65 Bid-YTW : 10.20 % |
| PWF.PR.T | FixedReset Disc | -1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 7.91 % |
| GWO.PR.R | Insurance Straight | -1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 6.21 % |
| GWO.PR.S | Insurance Straight | -1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 21.15 Evaluated at bid price : 21.15 Bid-YTW : 6.27 % |
| PWF.PR.F | Perpetual-Discount | -1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 6.20 % |
| CU.PR.I | FixedReset Disc | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 22.09 Evaluated at bid price : 22.42 Bid-YTW : 7.17 % |
| TD.PF.L | FixedReset Disc | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 22.68 Evaluated at bid price : 23.20 Bid-YTW : 6.75 % |
| BN.PF.D | Perpetual-Discount | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 6.58 % |
| FTS.PR.F | Perpetual-Discount | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 20.56 Evaluated at bid price : 20.56 Bid-YTW : 6.05 % |
| BN.PF.G | FixedReset Disc | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 14.75 Evaluated at bid price : 14.75 Bid-YTW : 9.33 % |
| TRP.PR.E | FixedReset Disc | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 15.16 Evaluated at bid price : 15.16 Bid-YTW : 8.67 % |
| MFC.PR.Q | FixedReset Ins Non | 1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 18.81 Evaluated at bid price : 18.81 Bid-YTW : 7.56 % |
| BMO.PR.S | FixedReset Disc | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 17.71 Evaluated at bid price : 17.71 Bid-YTW : 7.58 % |
| BN.PR.X | FixedReset Disc | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 14.75 Evaluated at bid price : 14.75 Bid-YTW : 8.21 % |
| BIP.PR.E | FixedReset Disc | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 21.07 Evaluated at bid price : 21.07 Bid-YTW : 7.27 % |
| TD.PF.C | FixedReset Disc | 1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 7.60 % |
| MIC.PR.A | Perpetual-Discount | 1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 6.52 % |
| PWF.PR.G | Perpetual-Discount | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 23.36 Evaluated at bid price : 23.65 Bid-YTW : 6.25 % |
| GWO.PR.P | Insurance Straight | 1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 21.86 Evaluated at bid price : 22.10 Bid-YTW : 6.15 % |
| TRP.PR.B | FixedReset Disc | 1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 10.70 Evaluated at bid price : 10.70 Bid-YTW : 9.18 % |
| TRP.PR.D | FixedReset Disc | 1.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 15.75 Evaluated at bid price : 15.75 Bid-YTW : 8.52 % |
| TRP.PR.C | FixedReset Disc | 2.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 11.40 Evaluated at bid price : 11.40 Bid-YTW : 8.90 % |
| BN.PF.F | FixedReset Disc | 2.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 16.17 Evaluated at bid price : 16.17 Bid-YTW : 8.94 % |
| BN.PR.N | Perpetual-Discount | 2.83 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 18.51 Evaluated at bid price : 18.51 Bid-YTW : 6.48 % |
| PWF.PR.L | Perpetual-Discount | 4.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 20.66 Evaluated at bid price : 20.66 Bid-YTW : 6.19 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BMO.PR.W | FixedReset Disc | 42,470 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 16.98 Evaluated at bid price : 16.98 Bid-YTW : 7.67 % |
| GWO.PR.H | Insurance Straight | 40,392 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 6.21 % |
| GWO.PR.G | Insurance Straight | 37,404 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 21.42 Evaluated at bid price : 21.68 Bid-YTW : 6.04 % |
| RY.PR.Z | FixedReset Disc | 36,265 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 17.30 Evaluated at bid price : 17.30 Bid-YTW : 7.58 % |
| TD.PF.L | FixedReset Disc | 22,111 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 22.68 Evaluated at bid price : 23.20 Bid-YTW : 6.75 % |
| SLF.PR.C | Insurance Straight | 21,721 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-10 Maturity Price : 18.95 Evaluated at bid price : 18.95 Bid-YTW : 5.92 % |
| There were 15 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.Q | FixedReset Ins Non | Quote: 18.81 – 22.50 Spot Rate : 3.6900 Average : 2.9888 YTW SCENARIO |
| TRP.PR.E | FixedReset Disc | Quote: 15.16 – 17.45 Spot Rate : 2.2900 Average : 1.6563 YTW SCENARIO |
| SLF.PR.D | Insurance Straight | Quote: 18.78 – 19.89 Spot Rate : 1.1100 Average : 0.6690 YTW SCENARIO |
| CM.PR.T | FixedReset Disc | Quote: 23.05 – 24.00 Spot Rate : 0.9500 Average : 0.5925 YTW SCENARIO |
| GWO.PR.H | Insurance Straight | Quote: 19.70 – 20.58 Spot Rate : 0.8800 Average : 0.5262 YTW SCENARIO |
| BMO.PR.W | FixedReset Disc | Quote: 16.98 – 18.00 Spot Rate : 1.0200 Average : 0.7482 YTW SCENARIO |