The focus this morning is (surprise, surprise) the continued negotiations, and more importantly the lack of progress, by US lawmakers to forge a credible long-term spending plan that will reduce the ongoing deficit while raising the current debt ceiling. The President took to the airwaves again this morning, urging American’s to keep the pressure on by phoning or e-mailing their representatives. House Speaker Boehner once again delayed a vote last night for his plan as he failed to drum up support within his own party. Futures immediately sank after that and North American markets opened deep in the red this morning, however indexes have been steadily climbing since. Economic growth slowed more than expected in the second quarter on both sides of the border, with US GDP expanding at only a 1.3% pace while Canadian GDP actually contracted in May. The Canadian results were likely impacted by effects from the tsunami in Japan, but were still short of the Bank of Canada’s forecasts and will ease any pressure to raise rates in the near future. The TSX is down 95 pts. The Dow has almost erased its initial triple digit decline, down just 9 pts at last check.
The Canadian dollar weakened after the GDP report and as oil retreats, off 38 bps to US$1.0471. Bond yields declined to 2.04% for the 5-year Canada and 2.79% for the ten. Of interest, the 5-year yield has declined over 15 bps since the last time mortgage rates were reduced just two weeks ago. Gold reached a new all-time high this morning, but has settled back to US$1625.10/oz, up $11.70 on the day. Oil down $1.60 to US$95.84/barrel
Scotia Bank reduced the interest rate on their fiv year fixed term mortgage being offered through the broker channel to 3.69% which is closer to the low end of the range. If bond rates continue to drop we may see additional drops ahead. However if the US does resolve their debt ceiling issue we could see some investors putting their money back int the US which could cause or bond rates to start moving up. If you are thinking of purchasing a property or your mortgage is up for renewal in the next 120 days it might be a good idea to set up a rate hold now to protect yourself.
If you have any mortgage questions please give me a call at 604-961-2400
