VERICO Designer Mortgages

Canada’s five-year bond yields reached their highest level in almost a year, in part due to improved employment numbers in the U.S., BusinessWeek reported. 

“Banks are hedging seasonal mortgage flows, which is weighing on the five-year sector,” Mohammed Ahmed, a rates strategist at CIBC told BusinessWeek. “Banks are receiving a fixed-rate asset and to hedge that, they typically pay the fixed rate in swaps, or sell cash bonds.”

Canada’s benchmark five-year bond yielded 3.04 per cent yesterday, the magazine reported, up 15 basis points from April 1 and the first time the yield has broker the three per cent mark since October 2008. The Bank of Canada will auction $3 billion worth of 1.5 per cent bonds tomorrow.

Most lenders raised five-year, fixed mortgage rates last week in anticipation of higher inflation. These rates will serve as the qualifier for borrowers when the new mortgage rules come into place on April 19. 

http://www.mortgagebrokernews.ca/news/bond-yields-rise-as-fixed-mortgage-rates-move-up/43642

Great info on HST from the Realtors Association of Hamilton-Burlington.

HST Update

OTTAWA — With Bay Street convinced the Bank of Canada will maintain its pledge to wait until July to begin raising interest rates, the debate now turns to how aggressively the central bank should behave thereafter.

In the view of a paper prepared for the C.D. Howe Institute, the central bank should act with zeal. If it wants to get ahead of the inflation curve, the bank should raise its benchmark rate by 50 basis points at every scheduled rate announcement until the middle of next year, the paper said.

Michael Parkin, an economics professor at the University of Western Ontario and member of the think-tank’s monetary policy council, said “steep” increases would be required to make up for keeping the benchmark rate so low for so long.

The paper comes a week before the Bank of Canada’s next interest-rate statement, scheduled for March 2 and the same day Mark Carney, the bank governor, held an annual meeting with leading private-sector economists in Ottawa.

The bank cut its benchmark rate last year to a record low 0.25%, and made a pledge — conditional on inflation — to keep it there until the end of June in an effort to pump up the economy amid the financial crisis. Analysts say the move has worked. Figures on gross domestic product, to be reported next week, should indicate the economy grew roughly 4% in the fourth quarter, above the central bank’s own expectations. And inflation is closer to the bank’s 2% target earlier than envisaged, although analysts suggest price increases could lose some steam in the weeks ahead.

The main thrust of Mr. Parkin’s argument is the central bank needs to raise rates as aggressively in anticipation of the recovery as cut in response to the financial crisis. This would be in line with the Taylor rule, which dictates by how much a central bank should move its benchmark rate in response to inflation.

Based on the central bank’s own economic projections, Mr. Parkin calculated the future path of interest rates. “When the [benchmark] rate starts to rise, it must be on a steep upward path,” he wrote. Under the Taylor rule the benchmark rate should in fact, be higher than present levels. As a result, a target rate “somewhat higher” than what otherwise would be required might be necessary for the latter half of this year and all of next, he said, “to avoid inflation running above target.”

Economists indicate the central bank, if possible, will keep its pledge because reversing course now could damage its credibility.

Other analysts also signalled that they shared some of Mr. Parkin’s view.

“In order to move from an exceptionally low to low-rate environment, you need to move fast,” said Sébastien Lavoie, economist at Laurentian Bank Securities, which last fall indicated in a report Mr. Carney would need to entertain rate increases of up to a percentage point.

Michael Gregory, senior economist at BMO Capital Markets, said that by mid-2011 the benchmark rate would “have to be in proximity of being neutral.”

However, he added the central bank would have to take into account the strength of the loonie in determining the appropriate level of interest rates. The currency is likely to climb as the Bank of Canada moves ahead of the U.S. Federal Reserve, and perhaps more aggressively, Mr. Gregory said.

Financial Post
(Feb 24, 2010)

January 21, 2010

CBC NEWS

At least two million people are homeless in Haiti

500,000 more than originally estimated

officials fear an outbreak of disease among survivors living in makeshift camps.

The grim figures from the European Commission come as reports continue to emerge about survivors being found more than a week after the Jan. 12 earthquake.

On Wednesday, a five-year-old boy was pulled out of the rubble from his home by his uncle. The boy, identified as Monley Elize, was severely dehydrated but in otherwise good condition.

His parents are believed to have been killed in the quake.

How to help

To help those affected by the earthquake, here is a list of organizations [http://www.cbc.ca/haitirelief] accepting donations.

Experts have said that without water, buried quake victims were unlikely to survive beyond three days. But rescuers continue to scour through the rubble of destroyed homes and buildings, looking for any signs of life.

Meanwhile, officials fear that those who survived the 7.0-magnitude quake are at increasing risk for a number of diseases.

“The next health risk could include outbreaks of diarrhea, respiratory tract infections and other diseases among hundreds of thousands of Haitians living in overcrowded camps with poor or non-existent sanitation,” Dr. Greg Elder, deputy operations manager for Doctors Without Borders in Haiti, told The Associated Press.

Medical clinics have 12-day patient backlogs, which means untreated injuries are festering.

Building collapses feared

According to the European Commission, many of the two million homeless are afraid to stay in their homes, fearing the buildings will topple in aftershocks.

The commission also believes that 250,000 are in need of urgent aid. While the death toll is estimated at 200,000, some say an exact tally will never be known.

I don’t think we will ever know what the death toll is from this earthquake,? Edmond Mulet, the newly appointed head of United Nations operations in Haiti, told the New York Times.

He said people are burying bodies by themselves, many have been thrown into dumps outside the city and an untold number still lie under the rubble.

About 80,000 are believed to have been buried in mass graves. Workers have been using earth-movers to carve out mass graves in Titanyen, north of Port-au-Prince, to bury 10,000 victims in a single day .

About 100 surgeons, nurses and medics with the 1st Canadian Field Hospital will deploy to Haiti beginning this weekend, CBC News has confirmed.

The mission will be based in Jacmel, a city of 80,000 near the capital that has an airstrip already in use by the Canadian military. The unit will set up a hospital with an intensive-care unit and up to 50 beds.

Two surgical teams, including a general surgeon and an orthopedic surgeon, will be in charge.

As donations for Haiti pour in from people around the world, the United States has passed a bill allowing faster tax breaks for U.S. donors.

It would allow donations made by the end of February to be deducted from 2009 tax returns. So far, Ottawa has not made a similar decision for Canadians who donate to the Haitian relief effort.

Many people were wondering last month why the Canadian Dollar started to lose value against the US Dollar, when it appears that the USA was in greater crisis mode in comparison to Canada.

Well here is why….

Canada is one of the world’s largest producers of oil and holds oil reserves second only to Saudi Arabia, which makes Canada very reliant on its most prized commodity. It is also the largest supplier to the world’s biggest oil consumer - the United States. Therfore, rising oil prices tend to be good for Canada/bad for the U.S., while falling oil prices tend to be bad for Canada/good for the U.S.

As you can see from the chart above, price movements USD/CAD and Oil are inversely correlated from each other - meaning as oil trends higher, USD/CAD tends to trend lower and vice versa.

Since January 1988, USD/CAD and Oil have had about a 68% inverse correlation to each other. This is a pretty strong correlation.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com

Each VERICO Broker is an independent owner operator.