Lucky Number 3

The third time is the charm was the old saying we use to have back in the day. It seems these days, things seem to come in 3’s. While I was busy trying to stay safe from Hurricane Milton – a category 3, there were a lot of things going on in the finance world for everyone North of Interstate 10.

In the last 3 weeks, we have had a barrage of data coming out that will be used by central bankers and economists to help them form their opinion of where we go from here. According to Ryan, here they are:

Jobs, jobs, jobs: It seems that the US wasn’t the only country expanding the work force in September. Even after every economist out there shit on the US jobs report – Canada put in a pretty respectable number itself. Canada showed a blowout 46,700 net jobs added in September, but even better still was the creation of, are you ready for it: 112,000 FULL TIME JOBS, and 65, 300 lost part time jobs. There wasn’t really anything to hate about this jobs report. It was as solid as I have seen in over 3 years. Average hourly earnings were down, which puts less pressure on inflation. Employers seem to be hiring, and commuting people from part time to full time.

US Inflation: Well, we got the US inflation report, and for ‘dancing with the realtors’ it wasn’t bullish. Inflation seems to be going the wrong way. Canada core edged up a bit in September, as did the US inflation data we got out this morning. US PPI ( Producer Price Index ) edged up, and seems to be heading from the mid 2’s to, dare I say it, the low 3%’s. While one month certainly does not make a market nor a trend, it does coincide nicely with the recent bond yield rally. Maybe the bond market knew what was coming, and hence yields are up?

Speaking of bonds, in case you haven’t looked, the Canada 5 year is now putting in a nice band, and wait for it, is hovering around the 3% range. Oddly enough, the 5 year was over 3% for most of the week, and then took a plunge around 12:15 EST today to finish out the day at 2.966%. It was a straight line down, and I am not quite sure what to make of it yet. Notwithstanding the lunch time drop, the 5 year yield is getting awful comfortable around the 3% mark. 3% is a key point for bonds right now. If the yield can clear 3%, then it can get up to around 3.27%, but if it cannot hold 3%, then 3% becomes a bit of a resistance level, and the floor looks to be around 2.72% ish. Oddly enough on a day you had US PPI coming in hot, and a wallop of a Canadian jobs number, I would have expected the yield to run run run.

And, it wouldn’t truly be my blog if I didn’t take a moment to take a swipe at a big bank. TD Bank, on the day of FINTRAC adaption day of all days, got smoked by US regulators. A whopping 3 BILLION dollar fine for their complicity in money laundering. For those of you keeping score at home, this fine was the largest ever fine in the US Financial system. The US is sending a message that they will not tolerate money laundering or the breaking of rules in the financial system. TD has locked horns with US Regulators for years, most recently they had their acquisition of First Horizon Bank squashed by the Department of Justice for not following rules. Now this massive fine. I find it interesting that every time TD gets caught in Canada they get a slap on the wrist, and a fine that amounts to pennies on the dollar for a large bank. The reason this matters is any broker who submits to TD is about to have their docs looked over and over with a fine tooth comb. You can also kiss a lot of rate discretion good-bye. TD is gonna need all the interest rate spread they can find to help pay off this 3B to the US Government. TD is now in the penalty box with US regulators, and everything they do will be looked over. Keep in mind, TD Bank has a larger foot print in the US than it does in Canada. More branches South of the Border than North of the Border.

As Florida has been smoked in the last 3 months with 3 named storms ( Debbie, Helene, and Milton ) we hope that bad things come in 3‘s and we are over it now. Now it is time for good things to happen in 3‘s. For mortgage markets, 3% seems to be the number that a lot of the Canadian economy will rest on for the next little bit. If bonds can stay below 3%, we have a chance at real estate holding its own. If we get over 3% on the 5 year yield, real estate will struggle to find it’s footing.

Oddly enough, I used the number three 23 times….

On a completely unrelated note, I want to send a sincere thank you to all the first responders, emergency workers, Police, Fire Rescue, US Army Core of Engineers, National Guard, Florida State Guard, and every person that is here in Florida to help us put the pieces back together. The outpouring of support has been beyond anything I have ever seen. I am always happy to see the Canadian flags flying off the back of all the equipment that is down here. From New Brunswick to Chatham Ontario, the lineman, the hydro crews, and the emergency response teams that are on the ground and in the thick of it brings a tear to my eyes. We will rebuild, stronger than ever, but none of it would be remotely possible without all the help.

#FLORIDASTRONG

#FUCKMILTONANDHELENE