On Friday, the S&P 500 was up 0.6% and Toronto was up 0.2%.
Aecon Group which had been strong lately was down 4.1%. It has had two recent major asset sales and it did not reveal the gain on either one. There will be clarification on this when it reports on April 25.
Fortis was up 3.0%.
The bank contagion worries are not over yet. Regulators and central banks continue to try to reassure markets. But depositors have a tendency to “run” at the any hint of trouble in a bank.
About Mortgage rates:
There has been speculation that fixed mortgage rates would come down given that the yield of the 5 year Canada bond is down to 2.8% from recent highs of 3.6% and has now been at or under 3% for almost two weeks.
But I see that 5 year GIC rates have not fallen much if any and are at 3.85% for the big banks.
If banks fund mortgages with GIC then for a slim 1.25% margin the 5 year mortgage rate would be 5.1%.
To the extent that banks can fund CMHC insured mortgages by securitising them through CMHC at an interest cost of not much more that the government yield of 2.8% then it seems possible that 5 year mortgages could be closer to 4.1%.
But I am not clear on the interest rate margins that the big banks get on 5 year CMHC insured mortgages. It’s a small margin because they can leverage it almost infinitely due to the government guarantee. Earnings say 1% interest margin on the banks’ own equity capital would be very slim but when you can earn a 1% margin on depositors money and when that category of government-guaranteed loan can be funded with almost entirely with deposit money, the ROE can work out to be quit high.
I am also not clear to what extent the big banks do securitise these mortgages as opposed to fund them with 5 year GIC deposits.
The bottom line for potential mortgage borrowers is that things are very much in flux at this time and it is especially important to shop around and to check with a mortgage broker. Mortgage renewals are an area where banks will likely not offer the best deal unless you threaten to shop around. And I (vaguely) understand that there may be barriers to shopping around in that a new stress test may be required if you switch lenders. If so, that’s highly unfair and makes you captive to the current lender.