Sunday, 22 July 2012

Canadian Bonds Up with US Treasurys as Fears About Europe Flare Up

Canadian bonds rallied with U.S. Treasurys Friday as renewed fears about the euro zone's debt crisis sent investors to safe-haven assets.
Yields for Canada's two-year bond were at 0.959% Friday, from 0.982% late Thursday. The 10-year bond was yielding 1.614%, from 1.656%, according to electronic bond trading platform CanDeal.
Yields for the 30-year bond were at 2.242%, from 2.275%.
Bond yields move inversely to bond prices.
Canadian bonds accompanied U.S. Treasurys on their sharp move higher Friday as investors grew worried about recent developments in Europe.
Even though euro-zone finance ministers approved Spain's bank bailout plan, concerns immediately shifted to the country's economic struggles. Amid efforts to cut spending and reduce debt, the Spanish government said it expects its economy to contract by about 0.5% next year.
The deepening recession in Spain, the fourth-largest economy in the euro zone, is hurting its government bond market and driving yields up. Spanish 10-year debt yielded 7.15% recently, a level many bond analysts say marks an unsustainable borrowing cost for the government in the long run.
"At the end of the day, there's just too much debt out there, and eventually they'll have to start to pay this stuff off," said Levente Mady, derivatives strategist at Union Securities in Vancouver.
Soft U.S. data and downgraded forecasts for growth there are underpinning bond markets, he said.
"As a result, Treasurys do better, and as a result of that, Canadas try and keep pace," Mady said.
In Canada, the front end of the yield curve benefited in early trading from news Canada's year-over-year core inflation was at 2.0% in June, shy of the expected 2.3% and in line with the Bank of Canada's inflation target of 2.0%.
Total annual inflation came in at 1.5%, short of the 1.7% the market was expecting.
Economists said the inflation data served as a positive for shorter-dated bonds Friday, but did not constitute a "game changer" for the market as the Bank of Canada adjusted its inflation forecasts lower in its policy report Wednesday.
"Note that the Bank of Canada became more dovish on the inflation outlook in its latest forecast, so it wasn't really factoring in near term inflation pressures as a reason for advocating the need for rate hikes down the road," said CIBC World Markets.

CANADA HOT STOCKS TO WATCH: West Fraser, CP, Antrim

Listed below are the stocks expected to move during Friday's trading session. They are listed with Thursday's closing prices.


West Fraser Timber Co. (WFT.T, C$50.93, -C$0.52, -1.0%) posted improved sales and earnings from continuing operations in the second quarter, helped by higher lumber prices. Analysts said the results exceeded expectations.


Canada's labor minister named William Kaplan as the arbitrator in a labor dispute between Canadian Pacific Railway Ltd. (CP, C$76.47, C$0.72, 1.0%) and the Teamsters Canada union, which represents some workers at the railroad. The government passed a bill to end a strike at CP in late May.


Antrim Energy Inc. (AEN.T, C$0.69, unchanged) got a rating boost to speculative buy from hold by Salman.

Wednesday, 20 June 2012

Canada Bonds Nursing Wounds Inflicted by Fed Speculation

The Canadian bond market, along with US Treasurys is still nursing the wounds inflicted by speculation that the Fed will announce some new monetary stimulus when its policy statement is released in less than half an hour. Two-years are yielding 1.077% vs 1.042% late Tues, 10-years at 1.794% from 1.761%. If the Fed disappoints those market players who are salivating over the prospects of more liquidity, that will be like applying a soothing balm to the bond market's injuries, and perhaps put the market back on a stronger footing.

Canadian Bonds Slump in Quiet Trade Ahead of FOMC

Safe-haven Canadian bonds slumped in quiet trading Wednesday, as investors pinned their focus on the potential for a further easing move from the Federal Reserve.

The market increasingly has come to anticipate some fresh stimulus from the Fed, raising the potential that Canada's government debt market could see a sharp rally if the Federal Open Market Committee, the Fed's policy-setting body, doesn't deliver.

Canada's two-year bond yield was at 1.079% Wednesday, from 1.042% Tuesday. The 10-year bond yielded 1.805%, from 1.761%. Bond yields move inversely to bond prices.

The FOMC concludes its two-day meeting with a policy statement at 12:30 p.m. EDT (1630 GMT) and a news conference around 2:15 p.m. EDT (1815 GMT) Wednesday.

Many investors expect the Fed to extend Operation Twist, a program set to expire this month in which the Fed sells shorter-dated U.S. government debt and buys up longer-dated ones to reduce long-term interest rates. But investors are also pondering the possibility that the Fed will adopt an outright, large-scale asset-purchasing program, or quantitative easing, which would add to the Fed's balance sheet. It would be the third such program in the U.S. since the start of the global economic crisis.

The market consensus is that the Fed will announce something Wednesday. Doing nothing other than delivering more dovish talk is considered "the least likely outcome," said Derek Holt, Scotiabank economist.

Wednesday, 13 June 2012

Pressure on Oil Makes Traction Slick for CAD

Scotiabank says comments from Saudi Arabia's oil minister suggest an expectation for loose supply-demand dynamics to continue as a result of diminished demand. "This suggests continued pressure on oil prices that may pose a near term challenge" to any Canadian dollar rally, firm says. The 30-day rolling correlation between CAD and WTI remains near its 12-month high at 0.93, Scotia says. "However, fundamentals are suggestive of longer-term CAD strength, given strong debt and fiscal metrics, and the most hawkish (on a relative basis) central bank among the majors," Scotia adds.

Tuesday, 12 June 2012

Canadian Bonds See Selling as Calm Emerges in Equity Markets

Canadian government bonds are in negative territory Tuesday with U.S. Treasurys as fixed-income assets are dragged lower while signs of stability emerge in equities.
The 10-year bond was yielding 1.795% Wednesday, from 1.762% late Tuesday, according to data provider CanDeal. Yields for Canada's two-year bond were at 1.022%, from 1.006%, while the 30-year bond was yielding 2.369%, from 2.338%.
Bond yields move inversely to bond prices.
Canadian bonds were selling off moderately during Tuesday's session as investors continue to digest the news of the proposed 100 billion euro ($125 billion) bailout for Spanish banks announced over the weekend. U.S. Treasurys were also trading lower ahead with new supply of $32 billion in three-year notes to be sold later on Tuesday.
With no significant data releases scheduled for Tuesday, bond markets remain "reasonably range-bound," RBC Capital Markets said in a research note.
That range-bound trade may continue for much of the week as investors view Greece's upcoming elections on June 17 as the next big major market-moving event.

Canada Housing Trust Reopens 5-Year Bond to Raise C$5 Bln

anada Housing Trust reopened its five-year bond maturing June 2017, aiming to raise 5 billion Canadian dollars (US$4.85 billion), according to people familiar with the matter.
Pricing of the offering is scheduled for Wednesday. The spread talk is for about 43 basis points over the Government of Canada 1.50% March 2017 benchmark. The bond carries a coupon of 2.05%.
Canada Housing Trust is part of Canada Mortgage and Housing Corp. (CMH.YY). It uses proceeds from the issue of Canada mortgage bonds to purchase mortgages packaged into National Housing Act mortgage-backed securities.

Canada Should Be in Trans-Pacific Partnership, Canadian, US Business Leaders Say

Leaders of two influential Canadian and U.S. business groups Tuesday called for Canada to be included in the Trans-Pacific Partnership, saying that the country shouldn't be pressured to give up its supply management practice that protects dairy and poultry farmers in return for entry into the trade group.
Canada is keen to join the TPP as it seeks to expand trade with fast-growing emerging markets, a move which acquired added urgency following the Obama administration's rejection of the Keystone XL pipeline project.
It is "absolutely essential" for Canada to be at the table for negotiations for the TPP, according to U.S. Chamber of Commerce President Thomas Donohue, who cited the long-standing geopolitical and security relationship between the two North American Free Trade Agreement partners.
"Canada should be a part of it and we vigorously support it," Mr. Donohue said in an interview here on the sidelines of an economic conference.
Some officials say the U.S. isn't keen to have Canada at the table in the early round of negotiations, which, according to Mr. Donohue, was "encouraged by people that had delusions that they could move more quickly" on the negotiations without new entrants. The idea was that others would be welcomed once an agreement had been nailed down. He disagrees with this notion, saying that it would be better if Canada, as well as fellow NAFTA member Mexico, were at the table.
The TPP, originally signed in 2005, comprises the U.S., Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. All nine countries have to agree to the inclusion of any new member.
Canada's supply management practice is a potentially sticky issue, but Canadian Chamber of Commerce president Perrin Beatty said all countries have different issues with regards to barriers in their agriculture sectors.
"The whole point of trade negotiations is you don't negotiate in advance," Mr. Beatty said in the joint interview with Mr. Donohue.
Canada's Natural Resources Minister Joe Oliver said separately that the endorsement from the business leaders was "helpful" and "positive."
The business leaders also said they expect TransCanada Corp.'s (TRP, TRP.T) planned Keystone XL pipeline expansion to receive full approval after the U.S. presidential election in November. The project envisions greatly increasing oil exports from Alberta to the U.S.
Mr. Donohue said the rejection of the line earlier this year by U.S. President Barack Obama was a "purely political decision" due to pressure from environmentalists. He said he expects the section of line from Oklahoma to Louisiana to be approved any time now, and for the rest to be given the go-ahead after the presidential election.
"The sooner that it's built, the better it is for the U.S. economy and for U.S. energy security," Mr. Beatty said.
Write to Nirmala Menon at nirmala.menon@dowjones.com
-Karen Johnson in Montreal contributed to this article.

Canada Resources Min: Faster Project Review Won't Exclude Aboriginal Input

Canada's natural resources minister said the federal government's plan to streamline environmental-assessment requirements won't keep aboriginal leaders from having their say on resource projects before they go forward.
Speaking to reporters at an economics conference in Montreal, Joe Oliver said government authorities would be "bringing the aboriginal communities into the process at an earlier stage, so they can be aware of what's happening earlier, and become part of it in a more meaningful way."
In April, Canada's ruling Conservative government said it planned to overhaul Canada's environmental regulatory system, which it said was too complex and was slowing down development of major projects, such as pipelines and mines. The proposed changes include reducing the number of agencies responsible for reviewing projects, limiting regulators to one environmental review per project, and limiting the timeframe for reviews.
The plans were hatched after the U.S. government earlier this year rejected the initial application of TransCanada Corp.'s (TRP) Keystone oil pipeline from Canada amid strong pressure from environmental groups, who are also campaigning against oil pipeline projects such as Enbridge Inc.'s (ENB) Northern Gateway pipeline to British Columbia coast.
The plan has raised some eyebrows in resource-rich Canada, where opposition politicians and environmental groups have said the changes could weaken environmental protections or impinge on aboriginal rights. Aboriginal groups in Canada have the right to be consulted over proposals to develop resources on traditional lands where they have a legal right to harvest, hunt and fish - even if they don't own the land outright.
--Ed Welsch in Calgary contributed to this article.

Canada Environment Min: Faster Project Review Won't Exclude Aboriginal Input

Canada's natural resources minister said the federal government's plan to streamline environmental-assessment requirements won't keep aboriginal leaders from having their say on resource projects before they go forward.
Speaking to reporters at an economics conference in Montreal, Joe Oliver said government authorities would be "bringing the aboriginal communities into the process at an earlier stage, so they can be aware of what's happening earlier, and become part of it in a more meaningful way."
In April, Canada's ruling Conservative government said it planned to overhaul Canada's environmental regulatory system, which it said was too complex and was slowing down development of major projects, such as pipelines and mines. The proposed changes include reducing the number of agencies responsible for reviewing projects, limiting regulators to one environmental review per project, and limiting the timeframe for reviews.
The plans were hatched after the U.S. government earlier this year rejected the initial application of TransCanada Corp.'s (TRP) Keystone oil pipeline from Canada amid strong pressure from environmental groups, who are also campaigning against oil pipeline projects such as Enbridge Inc.'s (ENB) Northern Gateway pipeline to British Columbia coast.
The plan has raised some eyebrows in resource-rich Canada, where opposition politicians and environmental groups have said the changes could weaken environmental protections or impinge on aboriginal rights. Aboriginal groups in Canada have the right to be consulted over proposals to develop resources on traditional lands where they have a legal right to harvest, hunt and fish - even if they don't own the land outright.
--Ed Welsch in Calgary contributed to this article.

Canadian Bonds Retreat as Equity Markets Rally on Positive Sentiment

Canadian bonds pulled back Tuesday, moving broadly lower as North American equity markets rallied during a relatively muted trading session.
Yields for Canada's two-year bond were at 1.024% late Tuesday, from 1.006% late Monday. The 10-year bond was yielding 1.811%, from 1.762%, according to electronic bond trading platform CanDeal.
Yields for the 30-year bond were at 2.382% Tuesday, from 2.338% late Monday.
Bond yields move inversely to bond prices.
After paring losses during the morning session, Canadian bonds retreated, with the longer end of the curve outperforming the rest of the maturity stack, following the sale of three-year U.S. Treasury notes Tuesday afternoon that saw mixed results.
The longer end subsequently receded against the other maturities, resulting in a steeper yield curve than on Monday.
With little economic data scheduled for release this week, investors took cues from external headlines. North American equity markets were supported by comments made by Federal Reserve Bank of Chicago President Charles Evans who called for additional monetary stimulus to be injected into the U.S. economy and led to a sell-off in fixed-income assets.
Europe continued to weigh on market activity as the European Central Bank reiterated that the euro zone needs to create a banking union to help stabilize the region's shaky fiscal outlook.
Canadian 10-year bonds, being highly correlated to U.S. Treasurys, could see yields edge further to 1.7% if confidence in the global economy continues to weaken and their U.S. counterparts move to a yield of 1.5% from 1.663% recently, said Peter Gibson, chief strategist for CIBC World Markets in Toronto.
"You'd have thought that given our better fiscal position that Canadian bond yields would be lower, but you've got a larger, more liquid market and the reserve status of the U.S. so people would tend to go there first," Mr. Gibson said.

Monday, 11 June 2012

Canadian Bonds Up as Markets Scrutinize Spanish Bank Bailout

Canadian bonds are moderately higher Monday as global financial markets take a harder look at the bailout deal for Spanish banks announced over the weekend.
Risk-sensitive assets slumped in North American trading after rallying over night and safe-haven markets, including Government of Canada bonds, advanced as investors scrutinized the EUR100 billion deal in greater detail and reconsidered its significance in resolving the euro zone's crisis.
Yields for Canada's two-year bond were at 1.027% Monday, from 1.040% late Friday. The 10-year bond was yielding 1.783%, from 1.809%, according to electronic trading platform CanDeal.
Yields for the 30-year bond were at 2.352%, from 2.365%.
Bond yields move inversely to bond prices.
"I think it's still what's going on in Europe that is the big driver today because there is not a lot of big news in North America," said Mathieu D'Anjou, senior economist at Desjardins Securities in Montreal.
"The market seems to have been a bit positive...about the bailout for Spanish banks, but I think what we're seeing now is that there is more and more doubt about this bailout," he said.
"We don't know everything about this bailout. The market wants to have more details about how it will be done," Mr. D'Anjou said. "It's an important step that had to be made, but it's just one step in the euro-zone crisis."
There are no significant data releases in Canada until Thursday, when capacity utilization data for the first quarter, the new housing price index for April and the Bank of Canada's financial system review will be released.

Toronto, Vancouver Housing Mkts 15% Overvalued -TD

Canada's two biggest housing markets, Toronto and Vancouver, seem to have diverged in recent months with the pace of sales slowing and prices declining in Vancouver, while Toronto retains a full head of steam. Average price changes can be deceiving and other measures indicate the divergence is less dramatic, it says. "The real parting of the ways seems to be between the market for single-family homes, where limited supply has kept prices firm, and the condo market, where construction booms have kept price increases more modest for both markets," it says. TD sees the divergence diminishing, but believes that, longer term, both markets are likely 15% overvalued.

Sunday, 10 June 2012

Spanish PM Hails EU Bank Aid, Says to Boost Confidence

Spain's prime minister Sunday hailed a 100 billion euro ($125 billion) credit line from the European Union for Spain's banks, saying it will help to shore up confidence in the ailing local economy and wider euro zone.
Mariano Rajoy also stressed that Madrid hadn't caved into pressure from the EU to fix its banks, but instead said he was the one calling for the aid.
The aid agreement came after days of talks between Spanish and European officials that culminated in a conference call among finance ministers Saturday afternoon, in which the framework for the support was agreed.
"The European project, the future of the euro and our banking system all won new credibility yesterday," Mr. Rajoy told reporters at a televised press conference in Madrid "This is a clear message that the euro project is irreversible."
"Europe has been up to the challenge," he said.
Mr. Rajoy said Spain wasn't under pressure to ask for EU help to fix its banks.
"I was the one putting pressure," he said. "I'd like to know why this deal wasn't reached earlier."
European governments were anxious for Spain to agree to a support package for banks that have suffered from a real-estate crash ahead of crucial Greek elections June 17, the outcome of which could send a new wave of turmoil through the region's financial markets.
The talks dragged on as Spain tried to minimize conditions on the loans, and limit the role of the International Monetary Fund, officials said, fearing it would send the wrong message to foreign investors on which the country depends to plug a government budget deficit that may reach over 5% of gross domestic product this year, down from 8.9% of GDP in 2011.
Madrid also sought strenuously to avoid the aid being depicted as a bailout like those provided to Greece, Ireland and Portugal.
Mr. Rajoy told reporters that the EU support plan for Spain was different to previous European rescues, and that loan conditions will be just linked to the country's banking sector overhaul.
A formal loan request by Spain is expected before June 21, when euro-zone finance ministers meet in Luxembourg and after a detailed report is issued by two government-appointed advisors on the banks' capital needs.
Rajoy is set later Sunday to travel to Poland, where he plans to meet that country's prime minister and watch Spain's opening match in the Euro soccer championship.

Speculators Pare Positive CAD Bets by Half

Speculative traders have cut their net long position CAD by 50%, bringing it to just $1.5B, according to CFTC data for the week ending June 5. They added aggressively to their already record short position in AUD, bringing it to $5.0B, notes Scotiabank. Sentiment toward CAD and toward AUD are both moving in the same bearish direction, but CAD longs are having a hard time capitulating, likely due to the relatively hawkish stance struck by the Bank of Canada, Scotia says.

Canadian Bonds End Higher, Outpace U.S. Treasurys In Choppy Trading

Canadian bonds ended higher Friday, paring some of their earlier gains but outperforming U.S. Treasurys in restless, headline-driven trading.
Yields for Canada's two-year bond were at 1.041% Friday, from 1.053% late Thursday. The 10-year bond was yielding 1.809%, from 1.826%, according to electronic trading platform CanDeal.
Yields for the 30-year bond were at 2.367%, from 2.383%.
Bond yields move inversely to bond prices.
"They were trading a little better, but they've given back a little bit," said one Montreal bond trader.
Canadian bonds were able to hold in more effectively than their U.S. counterparts as investors gained confidence in more risk-sensitive assets on expectations that euro zone officials might be able to forge a bailout for Spanish banks over the weekend.
"We lagged on the way up and are obviously outperforming on the way down," the trader said.
There was a an outburst of Canadian economic data after a recent dry spell, with Statistics Canada reporting job growth of 7,700 in April, slightly higher than the consensus forecast of 5,000.
The trade balance for April was deficit of C$367 million, weaker than the expected surplus of C$180 million and the first deficit in six months.
But the data were not far enough from expectations to roil the market significantly.
"In terms of economic data, there was nothing really shocking in one way or another," said David Tulk, chief Canada macro strategist at TD Securities.
Some of the activity on Friday was also attributable to position squaring ahead of the weekend, Mr. Tulk said.
"I feel like we're still in a holding pattern waiting for clarity in Europe ahead of the Greek election on [June 17]," he said.
The market will remain on tenterhooks and will continue to take direction from developments in Europe, the Montreal bond trader said.
"It's a headline-driven market, and that's all. If there's a credible plan that comes out of Europe, then the market will certainly be vulnerable," he said.

Friday, 8 June 2012

Canadian Dollar Ends Flat After Trimming Overnight Losses

The Canadian dollar bounced back from overnight weakness Friday to end virtually flat against the U.S. dollar in nervous trading, with investors staying focused on the sovereign debt crisis in Europe.
Slightly stronger-than-expected domestic employment data for May helped bolster the currency somewhat in volatile environment.
The U.S. dollar is trading at C$1.0283 from C$1.0278 late Thursday.
It had declined in earlier trading, with the U.S. dollar reaching a session high at C$1.0356 as investors shied away from risk-sensitive assets.
Jobs data in Canada came in slightly better than expected, with a gain of 7,700 net jobs in May against a consensus forecast of 5,000 and a gain of 58,200 in April. The unemployment rate remained steady at 7.3%.
"The market itself was probably prepared for a slightly worse number," said Shaun Osborne, chief currency strategist at TD Securities.
The modest strength in Canada's labor market in June was not seen as sufficient to influence expectations that the Bank of Canada is likely to remain sidelined for the rest of the year, if not longer. But it was enough to underpin a firming the loonie, which has been buffeted by strong head winds in earlier sessions as investors shied away from assets considered risk sensitive.
The market's attention honed in on the crisis in Europe, however, relegating domestic data to a secondary role.
"The focus is on [Spain] and the potential for some progress there, maybe a bank bailout of some sort over the weekend," said TD's Osborne. "At the moment, at least, that's helping us out."
But global markets have been fickle in their attitude to risk-sensitive assets, embracing them when the news flow is more positive and spurning them when it isn't.
"Everybody's forgetting that just 24 hours or so ago they were all gloom and doom because [Fed Chairman Ben Bernanke] wasn't strapping himself into the helicopter," Osborne said, referring to the top U.S. central banker's moniker "Helicopter Ben" based on a reference Bernanke himself made to a statement by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.
"It's all bipolar...very short-term, headline-driven trading at the moment," Osborne said.
The U.S. dollar's strong rebound against its Canadian counterpart on Thursday suggests any weakness will likely be short lived, he said.
"We did have quite a decent rally yesterday, so I'd be surprised if we got back even close to C$1.0200," Osborne said.
These are the exchange rates at 3:25 p.m. EDT (1925 GMT) and 8:00 a.m. EDT (1200 GMT) Friday, and late Thursday.

Thursday, 7 June 2012

Canadian Dollar Ends Flat, Cedes Early Gains on Bernanke Comments

The Canadian dollar rose to its highest level since May 29 in morning trading Thursday but then ceded its gains to end flat after congressional testimony from Federal Reserve Chairman Ben Bernanke fell short of explicitly signaling a new round of monetary easing.
The U.S. dollar was at C$1.0281 late Thursday and C$1.0276 late Wednesday, according to data provider CQG. It dropped to a low of C$1.0206 before rebounding after Mr. Bernanke's remarks at 10:00 a.m. EDT (1400 GMT).
Appearing before the Joint Economic Committee, Mr. Bernanke suggested that questions about the needs, and effectiveness, of more Fed stimulus for the economy remain very much unresolved.
Some market players had positioned themselves for a more definite signal about the potential for more monetary stimulus in the chairman's remarks, and risk-sensitive assets such as the Canadian dollar sold off afterwards as a result.
"The market's all about immediacy, and I think there was some faint hope one might see something earlier rather than later on that front," said Shane Enright, executive director, capital markets trading at CIBC World Markets.
"I think the reality is that Bernanke is always going to be offering a slightly more balanced view," he said.
Crude oil futures retreated after an initial boost from news of a rate cut in China, a development that also pressured the Canadian dollar, Mr. Enright said.
The C$1.0200 area will provide initial support for the U.S. dollar, and sellers will likely return on a move to the C$1.0300-25 area, he said.
On Friday, Canadian jobs data for May will be released. Economists believe the Canadian economy created 5,000 jobs in May after adding 58,200 in the previous month.
These are the exchange rates at 4:23 p.m. EDT (2023 GMT) and 8:00 a.m. EDT (1200 GMT) Thursday, and late Wednesday.

Canadian Bonds Decline for 4th Day As Sentiment Continues to Lift

Canadian bonds moved lower as an absence of negative news out of Europe and a wave of constructive economic data helped to convince investors to step aside from the safety of fixed income for a fourth-straight session.
Yields for Canada's two-year bond were at 1.069% late Thursday, from 1.054% late Wednesday. The 10-year bond was yielding 1.842%, from 1.803%, according to electronic trading platform CanDeal.
Yields for the 30-year bond were at 2.387% Thursday, from 2.350% late Wednesday.
Bond yields move inversely to bond prices.
After moving to record-low yields last week as heightened worries across Europe led to a broad flight to safety, bonds continued to decline, shrugging off a positive read of Canada's Ivey purchasing managers index and U.S. labor data.
Canadian bonds followed their U.S. counterparts with small gains after Federal Reserve Chairman Ben Bernanke provided testimony to Congress that failed to provide signs that further monetary stimulus would be injected into the financial system.
Those gains were short-lived and bonds registered a decline across the board. Issuance of Canadian provincial bonds that yielded more than their government counterparts also contributed to the sell-off, said Andrew Kelvin, senior fixed income strategist at TD Securities in Toronto.
"I would still characterize this bond market as being positioned defensively," Mr. Kelvin said.
He added that traders weren't taking positions ahead of Canadian labor data that will be released Friday morning, noting that the front-end of the curve would have seen more movement if investors were worried about domestic employment figures.
Canada is expected to report a gain of only 5,000 jobs in May.

National Bank Vancouver Mgr From HSBC Leaves

Ronald Walchuk has replaced Peter Evanoff as regional manager in Vancouver, British Columbia, for National Bank of Canada (NA.T), according to people familiar with the situation.
Mr. Walchuk currently oversees the bank's Victoria, B.C., branch and will continue in that role as well as assuming responsibility for National Bank's larger Vancouver region.
A spokeswoman declined to comment. Mr. Evanoff wasn't immediately reachable for comment, and Mr. Walchuk didn't immediately return a call seeking comment.
The departure comes in the wake of last year's purchase by National Bank of HSBC's Canadian retail-brokerage unit. Mr. Evanoff formerly worked for HSBC as the Vancouver chief. His exit follows the recent departure of another onetime HSBC manager Mike Miller, the former national sales manager for Ontario and the Atlantic region, who left in March.

Sunday, 3 June 2012

Tepid Canada Growth To Keep BOC Sidelined For '12 -BMO

BMO Capital Markets says March GDP of 0.1% in Canada doesn't provide a great handoff to 2Q, and it's not holding its breath for a strong pickup in growth given a still-soft U.S. economy and confidence headwinds emanating from Europe. Growth of 1.8% in Q1 as whole is well below the 2.5% projection penciled into the April MPR by the Bank of Canada, suggesting it may have to push back its estimate for the output gap to close in the first half of 2013. "Against this backdrop, the Bank of Canada will likely be on hold for the remainder of the year," BMO says.

Tuesday, 17 January 2012

CANADA TIP SHEET:Strong Balance Sheet Key For IA Clarington Fund

A strong balance sheet and willingness to hold a stock for the longer term are key to successful value investing, said Brad Radin, the newly appointed manager of the C$120 million (US$118.3 million) IA Clarington Global Equity fund.
A balance sheet with a lot of net cash and minimal debt will help ensure the company's survival while it works to overcome short-term difficulties with its operations, Radin said. Meanwhile, adopting a longer-term investment horizon, Radin said, increases his chances of buying a company at its most inexpensive point as a way of generating maximum returns once the company rights itself and the stock rebounds.
"Many investors are so focused on the short term that they just don't want to touch companies that have any sort of issues in the short term," Radin said. But "I believe those are typically the companies that are at the cheap prices because the short-term issues are known" in the market, he said.
Toronto-based Radin's typical holding period for a stock is about three years, "so I am OK waiting a year or two before [a company's issues] get resolved," he said. When that happens, "the shares really start to move."
For the one-year period ended Dec. 31, the fund returned negative 9%, versus a negative 2.9% return for the MSCI World (C$) index, according to tracking service Globe Investor. But Radin only started managing the fund at the end of November and December was a transition month as he sold old holdings and replaced them with new ones. Globe Investor shows that the fund returned an average of 4.3% over the three years ended Dec. 31, versus 5% for the index.
Globally, Radin has found opportunities in the financial services sector, which has been operating under a cloud because of the ongoing European debt crisis.
Morgan Stanley (MS) is one of Radin's financial holdings. It's one of the major global investment banks, yet its share price is down about 82% from its peak of US$90 in 2007 and down around 43% over the past 52 weeks. The weak stock price reflects investors' well-known concerns over Morgan Stanley's potential exposure to the euro debt crisis, uncertainty over its derivatives book, and its capital positions, Radin said.
But Radin is focused on how the stock was trading at a 10-year-low price-to-book value of around 0.4 times, as of Friday. On average the stock trades at about two times book value and in good times, it will trade at about 2.5 to three times book value, he said.
Radin suggested that potential catalysts to move the stock higher include moves to resolve Europe's debt crisis. Morgan Stanley also stands to benefit from a backlog of initial public offerings and other investment banking work as markets improve.
Other financial holdings include money manager Janus Capital Group Inc. (JNS), a beaten-up stock that Radin likes because of the big fee stream it generates and the company's efforts to "clean up its balance sheet," he said.
About 40% of the fund's weightings is in financial stocks, though Radin doesn't have exposure to banks in the U.S. such as Bank of America Corp. (BAC).
"We don't have a comfort level ... yet" with their credit exposure and balance sheet risk, Radin said.
He added that most of the fund's exposure to banks includes those with significant operations in Asia and little sovereign debt that are inexpensive just because of the "global hate on financials right now."
One such holding is Standard Chartered PLC (STAN.LN, 2888.HK). About 70% of its business is in Asia, with the top four markets being Hong Kong, Singapore, South Korea and India. By comparison, continental Europe, the U.K. and the U.S. combined represent less than 10% of its operation.

Canadian Bonds Rally As Bank of Canada Maintains Policy Rate

Canadian government bond prices rallied on Tuesday as the Bank of Canada kept its rates steady at 1%, as expected, amid a backdrop of increased uncertainty in international financial markets and higher risk aversion."While the economy had more momentum than anticipated in the second half of 2011, the pace of growth going forward is expected to be more modest than previously envisaged, largely due to the external environment," the Bank said in a statement. "Prolonged uncertainty about the global economic and financial environment is likely to dampen the rate of growth of business investment, albeit to a still-solid pace."
Bond yields, which move inversely to bond prices, fell across the curve. Canada's two-year bond yields fell to 0.942% Tuesday from 0.957% on Monday while the 10-year bond yielded 1.916%, down from 1.934%.
Bonds were also pressured earlier Tuesday following better-than-expected economic data from China and Germany, Europe's largest economy.

Canada Hot Stocks: Kinross, Dundee, Whiterock, Primero

Among the companies whose shares are making notable moves in Tuesday's session are Kinross Gold Corp. (KGC), Dundee REIT (D.UN.T), Whiterock REIT (WRK.UN.T) and Primero Mining Corp. (P.T).

Kinross Gold (C$10.69, -C$2.51, -19%) said it will require an additional six to nine months of analysis and planning to develop its Tasiast gold mine in Mauritania, and expects to record a "material" non-cash impairment charge in connection with the project.


Dundee REIT (C$33.50, -C$1.57, -4.5%) said it has agreed to buy Whiterock REIT (C$15.98, C$1.68, 12%) for C$16.25 a share in cash, subject to a maximum of C$360 million, or 0.4729 of a Dundee unit for each Whiterock unit. Whiterock's board supports the offer.


Primero Mining (C$3.25, -C$0.49, -13%) said some operating results at its San Dimas gold-silver mine in Mexico in 2011 didn't meet its expectations, mainly due to lack of grade predictability. As a result, it said it's undertaking a number of operations improvements and reviewing its current reserve and resource estimation methods. It puts 2012 production at 100,000-110,000 gold equivalent ounces, reflecting the lower ore grades its recently encountered.

Canadian Dollar Trims Gains In Choppy Trade After BoC Stands Pat

The Canadian dollar trimmed some gains in choppy trading Tuesday after the Bank of Canada held its key policy rate at 1.00% for the 11th straight time, as expected.The U.S. dollar was at C$1.0143 morning, from C$1.0137 just ahead of the central bank announcement, and C$1.0178 late Monday, according to data provider CQG.
In its one-page statement accompanying the rate decision, the central bank said the global economic outlook "has deteriorated and uncertainty has increased" since the Bank's October Monetary Policy Report.
It said the recession in Europe "is now expected to be deeper and longer" than earlier forecast. It said the economy of Canada's biggest trading partner, the U.S., will proceed "at a more modest pace going forward," a result of household deleveraging, fiscal consolidation and spillover impact from Europe's deepening woes.
On the domestic front, Canada's central bank said there is less slack in the economy and forecast that the economy will return to full capacity by the third quarter of 2013, three months sooner than forecast previously.
The Bank of Canada's statement may have blunted some lingering expectations in the market that the Bank might yet ease its 1.00% policy rate, reiterating its refrain that, "With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada."
Nonetheless, it offered "no indication that the Bank is seriously thinking about shifting away from the current 'wait and see' stance any time soon," said Peter Buchanan, economist at CIBC World Markets in Toronto.
The Bank is due to deliver a fuller explanation of its position on Wednesday, with the release of its quarterly Monetary Policy Report.
In June 2010, the Bank of Canada became the first central bank in the Group of Seven leading nations to raise interest rates since the onset of the global economic crisis. It hiked rates three times, before moving to the sidelines in September of that year, citing external risks to the domestic economy. It has been sidelined since.

Rate Cut In Canada Becomes Even Less Likely

Eleven of 12 primary securities dealers in Canada surveyed by Dow Jones say the Bank of Canada's next move is a ways off--but will be a hike, not a cut. And the BoC offers support for that view, reminding the markets today that Canada has "considerable" policy stimulus. "In fact, one new item in the statement was that these favorable financing conditions will buttress consumer spending and housing activity, taking the household-debt-to-income ratio even higher," notes TD economist Leslie Preston. And with Canadians already carrying record debt levels, "the global financial situation would have to become quite dire" for the BoC to adopt easier money policy.

A Fairly Dovish Bank Of Canada, But No Hint Of Easing

Canada's central bank, holding its rate steady at 1.00%, said it sees stronger external risks now, with Europe's recession likely to be deeper and longer, and US growth to be slow. It says Canada's economy will likely underperform earlier expectations, as external risks drag on exports. "There is no indication that the Bank is seriously thinking about shifting away from the current 'wait and see' stance any time soon," says CIBC. This is a bank on the sidelines, and likely to stay there all year -- and next, CIBC says. The gloomy domestic picture, and gloomier global picture, took wind from CAD's sails, but CAD is still up on day.