rates move up - end of month - limit up...?

Once again lenders are increasing mortgage interest rates by as much as 30 bp to the 5.69% lever for 5 years. this was prompted by the hawkish talk of the bank of canada outlining they are likely to increase interest rates prior to the end of the year. The banks are jumping the gun to increase their spreads ...why ?....because they can !
time will tell if the bank of canada goes through with the increase - they are caught between a rock and a hard place - they have finally agreed there is inflation in the system, something we have all known - especially anyone who has a car, uses electricity, eats fresh vegetables, heats their home or pays property taxes. DUH>>>>> the bank is behind the 8 ball on this one.
The only tool they have is to control the bank rate - an increase will likely send the canadian dollar closer to parity with the US counterpart - which in turn will hurt our exporters - this could cause additional loss of jobs - and you cannot get those back in an instance - a credit crunch is coming - i am personally hoarding my cash - and reducing debt - i suggest you do the same......
gregyoose out - (where are the ice cubes and olives ?...my god have you seen the price of olives lately ????)

rates on the rise in mortgage land...but....

As predicted interest rates have moved up to 5.49% for the 5 year term - as government bond yields have risen - but will the bank of canada increase rates - I still dont think so...here is what the Globe and Mail has to say

David Dodge's conundrum
TAVIA GRANT
Friday, May 25, 2007
David Dodge has a dilemma on his hands.
On one hand, inflationary pressure has been hotter than the central bank had anticipated, suggesting interest rates should rise. On the other, the Canadian dollar's swift ascent is pummelling Canadian factories, and any rate increase could add fuel to that fire.
Mr. Dodge and other central bank officials will make their decision Tuesday at 9 a.m. EDT on their key overnight lending rate. The rate, at 4.25 per cent, hasn't budged in a year and is expected to remain unchanged next week.
“While the risks of rate hikes have definitely risen, we judge that Canadian dollar appreciation...and the prospects for continued slow U.S. growth will likely keep Dodge & Co. on the sidelines, at least through the summer,” said Michael Gregory, senior economist at the Bank of Montreal, in a report titled “What Will Dodge Do?”.
After that, traders are wagering rates will rise.
Inflation and economic data over the past few weeks have all come in stronger than expected. Core inflation is running at a four-year high and Mr. Dodge acknowledged Monday that inflation is “a little bit stronger” that the bank's projections.
“There are limits to how far the Bank will allow core inflation to stray, regardless of the state of the U.S. economy or the loonie's trajectory,” Mr. Gregory said.
Price pressure prompted economists at the C.D. Howe Institute yesterday to urge the Bank of Canada to raise interest rates — a rare occasion that the think tank differs from the actions the bank will likely take.
“Both headline and core inflation are running ahead of the bank's target, growth in the monetary aggregates suggests that inflation will continue to run above target, and the policy rate is low in real terms,” the C.D. Howe Institute's monetary council said in an agreed statement.
BMO, meantime, believes Mr. Dodge “is still prepared to bet on housing-led U.S. economic weakness ... and decelerating domestic house prices to rein in inflation pressures, with the loonie's rise to 30-year highs providing a previously unanticipated ... but welcome disinflationary bias.'
The bank did, however, change its forecast for a rate hike, saying it will likely take place late this year instead of early next year.
The Canadian dollar traded at 92.28 cents (U.S.) Friday and has climbed almost 8 per cent this year.
© The Globe and Mail

But dont forget another possibly scenario in the USA
The housing market showed stronger than expected new home sales in April - and the economy is moving at a pace exceeding 2% - I think this is based upon a war economy - if the war stops (which I am sure the US really doesnt want to see happen) the economy would be shown to slow dramatically - and the huge deficits being racked up should be bad for the US dollar and good for Gold - longer term

greygoose out

crazy hazy..lazy ???? - days of ......

well as predicted interest rates are on the rise - 5 year money is moving from 5.24% to 5.44%. yet the market is still hot in real estate and there appears to be a never ending supply of people looking to consolidate large credit card debts into their mortgages - it would appear consumer spending has not been savings and cash - but easy credit. We will shortly see the credit tighten as lenders realize that all the people they gave large limits to....surprisingly some dont pay back the money...life happens. Pay off your debt - consolidate - get ready to protect yourself against the downturn which will eventually come - its a matter of time..is Mr. Dodge - getting out of Dodge because he doesnt want to be around for the downturn ?...we will see

greygoose out

ahh the weekend....

the victoria day weekend is upon us - the bank of canada meets again at the end of May...what will happen ?... well the canadian dollar is at a 30 year high - which will likely keep the bank of canada on the sidelines even though core inflation is at a high of 2.5% - the high dollar could trigger as slowdown in our economy later in the year - and the US economy is still weak - also there is the eventual spectre of the Chinese stock market tanking after a 150% increase - this would cause a world wide drop in the stock market - like we saw in the early spring. Consumer confidence would be rocked and they would likely go into hiding - which would trigger a slow down - thus forcing the bank of canada to lower rates - in order to keep the economy moving.
time will tell - but for now I suspect the bank of canada will keep prime constant - but the banks will increase mortgage rates as the spreads over the govt bonds has narrowed dramatically. Next week expect rates to rise 20-25bp..
greygoose out...where is the vodka and olives ?

late breaking bulletin

as we move to the victoria day weekend in canada - i am wondering if the lenders will pull their traditional spring and summer long weekend trick - they usually bump interest rates over a long weekend to avoid the rush of consumers trying to lock in lower rates. It will be interesting to see if the rates rise over the weekend - with spreads narrowing - i am sure the longer term rates will move up...just not sure exactly when
lock in now if you have a mortgage coming due or plan to purchase in the next 120 days

greygoose out

roller coaster keeps moving

the bond rates are moving up - 5 year govt bonds at 5.29 +8 basis points / 10 year bond rates at 4.287 up 4.5 basis points and 1 year tbills at 4.36 up 4 basis points.
there is still very little spread -in the rates and with the canadian dollar over 91 cents - the question becomes will prime drop and long term rates move up ?
inflation is picking up in spite of what the government says.
the only caveat - is the stock market may take a hit which would take the steam out of investor and borrower confidence.....time will tell.
Off to the hospital with Joanne - to see if all is well with her ankle.
greygoose out

bond rates move up ...dollar moves up..dilema ???

The bond rates have been creepin upwards - currently government of Canada bond rates are 4.213 for 5 years and 4.24% for 6 months - we have a virtually flat curve - with a little upward bias in the 1 year term. With mortgage rates around 5.14-5.25 this is a very tight margin when compared to the bonds. Normally you would think rates will move up.
but the canadian dollar is at 91 cents - and moving towards parity...therefore the bank of canada is not likely to increase rates - I suspect we will see short term rates drop and long term rates increase - thus moving the market back to a normal bias...time will tell...lets wait and see
greygoose out.
p.s. thanks to everyone who called about joannes ankle - she is resting on the couch -and if i dont have a heart attack...we will do just fine.

sunny day ...oh sunny sunny sunny days.....

this weekend has been fabulous - except for Friday night when my wife Joanne - tripped on the way to get the mail and broke her ankle. the next 4-6 weeks will be a challenge. And then on Saturday i was on 'experts on call' on CFRA radio. Rates are good the weather is good - now is the time to refinance or buy a new home..

watching the players championship - we will see if Phil Mickelson can hold it together.....

greygoose out

goodbye dear Jim...

I haven't posted for awhile - as i have been mourning the sickness and recent passing on Thursday of Jim O'Connell. Jim worked at CTV in Ottawa and most recently was the anchor for ROBTV (now Business News Network) for a show Marketcall with Jim O'Connell.
We enjoyed a few dinners together when i was in Toronto with another dear friend who was a very good friend of Jim's. We laughed, Joked and traded thoughts - he was a true gentleman.
Our last dinner in October of 2006 - He announced he was getting married to the love of his life - Lisa - whom I had met the year before. Life seemed great - then on Feb 14 (valentines day of all days.....) he received the diagnosis of colon cancer. He immediatley went for surgery - but alas it had spread too quickly. We lost Jim on Thursday.. I have been torn with thoughts - why do cranky, miserable people seemingly live forever, while the true gentle people are taken too soon ? Jim - you made an impression on me and I looked forward to many more dinners and the possibility of getting you to golf and also talk to my Kiwanis Club next year...alas it will not happen - REST WELL MY FRIEND - you will be remembered.

greygoose out.