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.