Employers added 253,000 jobs in April, the Labor Department reported Friday, in a reversal of the cooling trend that had marked the first quarter and was expected to continue.
The unemployment rate was 3.4 percent, down from 3.5 percent in March, and matched the level in January, which was the lowest since 1969.
…
All of that has benefited groups that have historically been at a disadvantage in the labor market. The unemployment rate for Black Americans reached its lowest point on record in April, at 4.7 percent, and the gap between the unemployment rates of white and Black people was also the smallest ever measured. The share of working-age people participating in the labor market reached 83.3 percent, matching a level not seen since 2008.
…
Average hourly earnings climbed by 4.4 percent in the year through April. That compared with 4.3 percent in the previous month, and was more than the 4.2 percent that economists had expected.
…
More than four out of every five people in their prime working ages between 25 and 54 are now in the labor force. That rate has jumped in recent months — and it continues to rise above prepandemic levels.
And in the frozen North:
The Canadian economy gained 41,400 jobs in April, exceeding expectations for an increase of 20,000, while the jobless rate stayed near a record low.
…
Money markets are still expecting an interest rate cut by the BoC this year, but chances of a cut as soon as October fell to about 30% from 70% before the data.
…
Canadian government bond yields were higher across a flatter curve. The 2-year rose 16.1 basis points to 3.728%, while the 10-year was up 12.3 basis points at 2.923%.
BIS has released a Working Paper by Mathias Drehmann, Mikael Juselius and Anton Korinek, titled Long-term debt propagation and real reversals:
Summary
Focus
Economic propagation mechanisms that capture how disturbances systematically feed through the economy over time are central to macroeconomic models. Such mechanisms allow us to understand the behaviour of key macroeconomic variables and help us make more reliable forecasts. Unfortunately, many macro models lack strong propagation based on understandable economic behaviour and instead rely on mechanisms for which there is no economic rationale.Contribution
We describe a natural propagation mechanism through which new borrowing can systematically affect future output and lead to reversals in activity. The starting point is simple: the majority of debt contracts are long-term and imply regular future debt service payments (consisting of interest and amortisations). These payments pile up during a credit boom and, as time progresses, eventually outweigh the flow of borrowing. When this happens, the positive output effect from the credit boom reverses and output falls. We confirm this pattern using data from many countries over the last four decades.Findings
Using a novel multi-country data set of debt flows, we find that the prevalence of long-term debt leads to predictable patterns in the data. In the short term, an increase in new household borrowing is associated with higher output growth. Over time, as the stock of debt increases, debt service payments place an increasing drag on output. Eventually the negative debt service effect outweighs the positive effect from borrowing, leading to a real reversal. We find that this mechanism largely accounts for the well documented fact that growth tends to systematically slow for several years after a credit boom.Abstract
We examine a propagation mechanism that arises from households’ long-term borrowing and show empirically that it has sizable real effects. The mechanism recognises that when there is long-term debt, an impulse to new borrowing generates a predictable hump-shaped path of future debt service. We confirm this pattern using a novel multi-country dataset of debt flows. Whereas new borrowing boosts output contemporaneously, debt service depresses output. Credit booms thus lead to predictable reversals in real economic activity several years later. This long-term debt propagation channel is the main reason for why indicators of credit cycles have predictive power for future economic activity.
In addition BIS released a Working Paper by Katharina Bergant, Francesco Grigoli, Niels-Jakob Hansen and Damiano Sandri titled Dampening global financial shocks: can macroprudential regulation help (more than capital controls)?:
Summary
Focus
Fluctuations in global financial markets can severely destabilise emerging market economies (EMEs). The academic and policy debate on enhancing their resilience has focused on the role of capital controls and foreign exchange intervention because these tools directly target international financial transactions. In this paper, we provide a different perspective by asking whether EMEs might also rely on macroprudential regulation to protect themselves against global financial shocks.Contribution
To tackle this question, we assemble a rich data set for 38 EMEs between 2000 and 2019. The econometric analysis examines whether a more stringent level of macroprudential regulation reduces the effects of global financial shocks on EMEs’ economic activity. We also investigate whether stricter macroprudential regulation allows for a more countercyclical monetary policy response in EMEs vis-à-vis global financial shocks. Finally, we compare the results with those associated with the use of capital controls.Findings
We find that macroprudential regulation can significantly enhance the resilience of economic activity in EMEs to global financial shocks. A broad set of macroprudential tools contributes to this result, including measures targeting bank capital and liquidity, foreign currency mismatches and risky credit. We also find that macroprudential regulation enhances monetary independence by allowing for a more countercyclical response to global financial shocks. The strength of these results is remarkable since we do not find evidence that capital controls provide similar benefits. Hence, macroprudential regulation emerges as a key instrument for bolstering the resilience of EMEs against the ebb and flows of the global financial cycle.Abstract
We show that macroprudential regulation significantly dampens the impact of global financial shocks on emerging markets. Specifically, a tighter level of regulation reduces the sensitivity of GDP growth to capital flow shocks and movements in the VIX. A broad set of macroprudential tools contributes to this result, including measures targeting bank capital and liquidity, foreign currency mismatches, and risky credit. We also find that tighter macroprudential regulation allows monetary policy to respond more countercyclically to global financial shocks. This could be an important channel through which macroprudential regulation enhances macroeconomic stability. We do not find evidence that capital controls provide similar benefits.
| 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 | -0.2537 % | 2,267.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2537 % | 4,348.3 |
| Floater | 9.94 % | 10.14 % | 33,365 | 9.38 | 2 | -0.2537 % | 2,505.9 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0307 % | 3,345.3 |
| SplitShare | 5.03 % | 7.50 % | 44,385 | 2.58 | 7 | 0.0307 % | 3,995.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0307 % | 3,117.1 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1441 % | 2,746.1 |
| Perpetual-Discount | 6.21 % | 6.27 % | 48,660 | 13.54 | 34 | -0.1441 % | 2,994.4 |
| FixedReset Disc | 5.81 % | 7.38 % | 87,406 | 12.34 | 63 | 0.0646 % | 2,130.6 |
| Insurance Straight | 6.07 % | 6.19 % | 66,361 | 13.60 | 19 | -0.0129 % | 2,964.8 |
| FloatingReset | 10.50 % | 11.03 % | 49,056 | 8.73 | 2 | 0.0683 % | 2,379.8 |
| FixedReset Prem | 6.96 % | 6.37 % | 350,023 | 12.98 | 1 | 0.0396 % | 2,322.8 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0646 % | 2,177.9 |
| FixedReset Ins Non | 5.95 % | 7.03 % | 83,213 | 12.45 | 11 | 0.2059 % | 2,342.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| RY.PR.M | FixedReset Disc | -4.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 16.47 Evaluated at bid price : 16.47 Bid-YTW : 7.68 % |
| NA.PR.S | FixedReset Disc | -2.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 17.21 Evaluated at bid price : 17.21 Bid-YTW : 7.57 % |
| CU.PR.D | Perpetual-Discount | -1.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 6.20 % |
| CU.PR.E | Perpetual-Discount | -1.75 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 6.23 % |
| MIC.PR.A | Perpetual-Discount | -1.73 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 6.89 % |
| GWO.PR.Q | Insurance Straight | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 20.61 Evaluated at bid price : 20.61 Bid-YTW : 6.34 % |
| PWF.PF.A | Perpetual-Discount | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 18.21 Evaluated at bid price : 18.21 Bid-YTW : 6.23 % |
| IFC.PR.A | FixedReset Ins Non | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 17.59 Evaluated at bid price : 17.59 Bid-YTW : 6.71 % |
| IFC.PR.F | Insurance Straight | 1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 22.20 Evaluated at bid price : 22.45 Bid-YTW : 5.97 % |
| BMO.PR.E | FixedReset Disc | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 20.95 Evaluated at bid price : 20.95 Bid-YTW : 6.61 % |
| IFC.PR.C | FixedReset Disc | 1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 7.26 % |
| BN.PR.Z | FixedReset Disc | 1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 19.66 Evaluated at bid price : 19.66 Bid-YTW : 7.63 % |
| NA.PR.G | FixedReset Disc | 1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 6.71 % |
| BIP.PR.E | FixedReset Disc | 1.89 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 21.32 Evaluated at bid price : 21.60 Bid-YTW : 7.19 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.B | FixedReset Disc | 47,960 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 16.91 Evaluated at bid price : 16.91 Bid-YTW : 7.44 % |
| IFC.PR.A | FixedReset Ins Non | 44,969 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 17.59 Evaluated at bid price : 17.59 Bid-YTW : 6.71 % |
| TD.PF.A | FixedReset Disc | 43,100 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 16.81 Evaluated at bid price : 16.81 Bid-YTW : 7.40 % |
| MFC.PR.K | FixedReset Ins Non | 25,800 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 18.07 Evaluated at bid price : 18.07 Bid-YTW : 7.13 % |
| TRP.PR.E | FixedReset Disc | 25,400 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 15.05 Evaluated at bid price : 15.05 Bid-YTW : 8.48 % |
| TD.PF.E | FixedReset Disc | 20,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-05 Maturity Price : 18.26 Evaluated at bid price : 18.26 Bid-YTW : 7.28 % |
| There were 6 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TD.PF.D | FixedReset Disc | Quote: 17.86 – 20.00 Spot Rate : 2.1400 Average : 1.3073 YTW SCENARIO |
| RY.PR.J | FixedReset Disc | Quote: 18.00 – 19.00 Spot Rate : 1.0000 Average : 0.5928 YTW SCENARIO |
| NA.PR.W | FixedReset Disc | Quote: 16.75 – 17.40 Spot Rate : 0.6500 Average : 0.4324 YTW SCENARIO |
| NA.PR.S | FixedReset Disc | Quote: 17.21 – 17.75 Spot Rate : 0.5400 Average : 0.3512 YTW SCENARIO |
| GWO.PR.Q | Insurance Straight | Quote: 20.61 – 21.20 Spot Rate : 0.5900 Average : 0.4121 YTW SCENARIO |
| GWO.PR.Y | Insurance Straight | Quote: 18.80 – 20.00 Spot Rate : 1.2000 Average : 1.0397 YTW SCENARIO |