Mortgage for Change Blog

·         TSX -22.14 to 13,524.82 (Reuters)  reversed a near 1 percent gain in volatile trading, declining for a third straight session as Japan 's nuclear crisis and clashes in the Middle East weighed on investor sentiment, with strong resource prices cushioning the TSX's fall.

·         DOW -242.12 to 11,613.30 Equity markets are being rocked as black-swan events** in the Middle East and Japan weigh heavily on sentiment. The drop was also fuelled by weak U.S. housing data as US housing starts plunged to its lowest level in a year

·         Dollar -.80c to 100.83c USD  the loonie is trapped in a global rush to the exits from risky assets sparked by the nuclear crisis in Japan

·         Oil +-$.80 to $97.98USD per barrel

·         Gold +$3.30 to $1396.00 per ounce

·         Canadian 5 yr bond yields markets -.10bps to 2.44. The spread (based on the MERIX 5 yr rate published rate of 4.04%) is above the comfort zone at 1.60 as bonds soar in a flight to safety    http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en  .

The rate of return on your bond, can be read through a yield curve, If the increase in bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Currently lenders are looking for a spread between 1.35 and 1.55

**One more animal to add to our financial zoo. We have the bull, the bear, the dove, the hawk and now the black swan. Characterized by philosopher Nassim Nicholas Taleb, the black swan theory refers to events that are undirected and not predicted. Based on Mr. Taleb’s criteria, the event is a surprise, has a major impact on society, and is rationalized by hindsight. Past examples include 9/11 and the sub-prime mortgage crisis that tipped off the recent recession.

While not everyone one will agree, many market observers, including noted bear Nouriel Roubini, are describing Japan’s nuclear emergency and political turmoil in North Africa and the Middle East as “black swans” that are adding significant headwinds to financial markets.

We are seeing fixed rates continue to rise this week with the current best 5 year at 4.50% (available for rate hold - quick close specials are slightly lower).

Today's Financial Update:

• TSX -69.85  fell for a second straight day as worries over Europe's fiscal troubles outweighed a brief shot in the arm provided by a more upbeat U.S. Federal Reserve outlook.  Spain was hit by a credit rating downgrade, following downgrades to Greece and Portugal on Tuesday
• DOW +53.28 to 11,045 after the U.S. Federal Reserve left interest rates unchanged near zero and offered a brighter economic view. The U.S. central bank renewed its promise to keep rates low for an "extended period" and said U.S. consumer and business spending were picking up steam.
• Dollar +.86c to 99.13cUS   
• Oil +$.78 to $83.22US per barrel.  
• Gold +$9.60 to $1,171.80 USD per ounce  
• Canadian 5 yr bond yields +.06 to 3.08. The spread is back in the high end of the comfort zone expect rate increases. 
  
  http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

The rate of return on your bond, can be read through a yield curve, If the increase in bond yield  continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Currently lenders are looking for a spread between 1.35 and 1.60

Are Big Banks jumping the gun?

Rob Carrick
The Globe and Mail Published on Thursday, Apr. 29, 2010

Interest rates are rising – we all get that – but it looks like the Big Banks are pushing things a bit with mortgages.

After a pair of increases in the past two weeks, the posted Big Bank five-year fixed mortgage rate now stands at 6.25 per cent. Does that seem high? In fact, it’s just half a percentage point below the average level for the past decade.

We’re supposed to be in the early phase of what could be a long cycle of rate increases. The Bank of Canada hasn’t even started raising its overnight rate, which sets the trend for borrowing costs other than fixed-rate mortgages. The overnight rate could very well start rising June 1 (that’s the central bank’s next rate-setting date), but even then it’s not dead certain that rates will move.

Mortgage rates are linked to bond yields, which have been rising for a while now. But mortgage rates have been moving faster. full story