I got to bed late last night. Don’t get me started. Just don’t.
The Canadian government is tightening the rules on mortgage lending again in a bid to cool the still-hot housing market without stalling
it entirely. It is a risky business Ottawa is undertaking, attempting to ease pricing pressures in some markets while continuing to promote home-ownership
and demand in others with a blanket set of rules and regulations for all. Federal Finance Minister Jim (You’d-Be-Crazy-Not-to-Buy-at-These-Prices)
Flaherty has cut the maximum amortization for a government-insured mortgage to 25 years from 30 and will limit the amount of equity that can be borrowed
against a home to 80 percent of the property’s value from 85 percent. The changes will mark the fourth time in four years the federal government has tried
to temper the housing market, leaving aside the near-constant jaw-boning from the finance ministry and Bank of Canada that things continue to be
Anything that affects the housing market affects our audience -- from the retail investor to the bond broker to the bank executive to the guy stuck
watching us on the treadmill because someone has walked away with the remote. We need to talk about the potential impact of the measures on the broader
economy. Will they affect the pace of growth in some jurisdictions more than others? Will building starts slow? What about the condo jungle that is
spreading like kudzu along the Toronto waterfront? What about the renovation industry in Vancouver?
We need to talk about the impact on the lenders, from the big banks to the small lending outfits that cater to families that have trouble borrowing
We need to talk about the Bank of Canada and what the measures could mean for interest rates. Scotiabank released a note a few moments ago stating the
decision “gives us greater conviction yet that the Bank of Canada will not be tightening policy in 2012 or perhaps in 2013 (our forecast is by mid-2013).”
The rate strategy team at RBC Capital Markets says of the measures that “the biggest impact will likely be felt through the reduction in the maximum
amortization period, which -- at the margin -- will hurt first-time home buyers.”
I’ll note here that Bank of Canada governor Mark Carney is slated to speak at an event in Halifax at 12:45 p.m. ET. His comments come less than 24 hours
after the U.S. Federal Reserve extended Operation Twist and cut its forecasts for economic growth and inflation, and raised its expectation for the
unemployment rate. We need to frame our discussion of Ottawa’s attempt to slow an important component of the Canadian economy at a time that our biggest
trading partner is growing less than previously thought.
Commodities need to be an important component of all our markets coverage today. Both gold and oil have resumed their declines. The connection between
oil and the outlook for weakening economic growth is pretty clear but many investors are still mystified as to why gold remains mired at current levels
amid growing expectations of further quantitative easing in the U.S. and elsewhere.
This wouldn’t be a morning note to the newsroom without mention of an event in a far-away country that specializes in olive oil and cured meats of one
sort or another. Today the spinning bottle points to Spain where the company paid the most in at least eight years to
sell three-year bonds. The Spanish Treasury sold a little more than 2 billion euros in bonds at an average yield of 4.7 percent compared with 2.1 percent
back in March. Ouch.
Minister Flaherty was just asked whether he felt like “the lone ranger” in making these mortgage decisions. He responded with the most spontaneous and
authentic smile you are likely to see on a politician today. Somebody grew up with a black and white TV.
Every morning Managing Editor Marty Cej writes a "chase note" to BNN's
editorial staff listing the stories and events that will be in the spotlight
that day. Click here to have it delivered to
your inbox before the trading day begins.