Weekly Mortgage News for April 24, 2009

April 24, 2009

This weeks top stories include a cut to the overnight lending rate from the Bank of Canada while they move in a new direction to help aid the economy. An article on a recent survey of economists that takes a look at what to expect in the near future from the BoC. As well as, how the economy has effected one age group more than others and where foreign investors put there money in the month of February.

Bank of Canada cuts benchmark rate to historical low

The Bank of Canada announced that the recession is far worse than thought to be and will be deeper and longer than expected. In reaction to this they have cut the overnight lending rate, from an already historically low 0.5%, to an astonishing 0.25%. They hinted towards the fact that it would stay at this rate at least until mid 2010 based on it’s forecasts on the inflation rate.

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Bank of Canada moving in new direction. Printing money, Stimulus, Bonds?

The Bank of Canada says it may need to move in a new direction to stimulate the economy if the interest rate cuts are not enough. The central bank is left with no choice, as the overnight lending rate is at 0.25% the lowest in history. The bank says that the only reason that they don’t bring the rate to 0% is because it would disrupt financial trading. The bank has rapidly lowered interest rates to prompt business and consumer spending and the Harper government committed $35 billion to economic stimulus over the next two years. The BoC suggested that if required to do so, they have the option to flood the market with new money, allowing more available money to lend. The other option they are currently viewing is purchasing corporate bonds. With the economy not expecting to show growth until the end of 2009 and predictions towards a slow 2010 the Bank of Canada is left with only a handful of options. What do you think?

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A Bloomberg survey of economists shows that The Bank of Canada will move quickly to implement extraordinary monetary policies and focus on limited purchases of government debt and commercial paper. The survey also predicts that Governor Mark Carney may adopt so called quantitative and credit easing policies by July, injecting between $10 billion and $50 billion into the economy. The central bank has projected inflation will drop below zero for two quarters this year as Canada’s economy enters it’s first recession since 1992.

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Recession hits young workers harder than others

Young people aged 15-24 who have been working full-time have lost an outstanding number of the jobs that have disappeared due to the current recession. Statistics Canada announced, in its latest labour force survey, that almost 15% of people aged 15-24 are currently unemployed, which is the highest rate since 1998. Canada has suffered the highest rate of job losses over a five month period since the 1982 recession with 357,000 jobs lost since October. With the summer coming up and students ready to join the work force the question on everyone’s mind is whether there will be jobs available? As of right now it’s not looking promising.

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Foreign investors go Canadian in February

Foreign investors added $6.1 billion in Canadian securities to their portfolios in the month of February. The investments were not only made in bonds but equities as well. Canadian investors acquired only $2.9 billion in foreign securities with acquisitions comprised of money market instruments and equity. The overall supply of Canadian federal government debt remained high, staying in line with the previous four months, but was mainly comprised of long-term instruments in the month of February. As a result, non-residents acquired $1.1 billion of federal government bonds that were mainly five-and 10-year benchmark bonds.

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