*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[BagoPucks]

Originally Posted by opendoor

And beyond the policy rate, the Bank of Canada is currently selling off a ton of bonds, which will tend to raise the yield. Just in the last month, they've sold off (or not rolled over) almost $30B in Federal government bonds which represents about 3% of the total outstanding value in existence.

Wait, honest question - why does government selling off bonds increase bond yields? Is it that they have to raise yields to keep it attractive?

[bizaro86]

Originally Posted by BagoPucks

Wait, honest question - why does government selling off bonds increase bond yields? Is it that they have to raise yields to keep it attractive?

Supply and demand. If the Bank of Canada sells off a bunch of bonds the price of bonds goes down. If the price of a bond goes down the yield goes up.

Simple example: if you have a bond with face value of $100 that pays 5% interest, and then the price goes down to $90, now your current yield is 5/90= 5.55%.

That's super simplified, the yield to maturity (which is what is reported/matters) would actually be way higher because that bond pays the $100 at maturity so you have to account for that as well.

Same reason the government running huge deficits generally increases bond yields. If they sell a bunch of bonds the supply of bonds goes up which lowers the price.

**in this case the Bank of Canada is selling/redeeming old bonds that they bought during covid for quantitative easing, when they were trying to lower rates/juice the economy.

[opendoor]

Originally Posted by BagoPucks

Wait, honest question - why does government selling off bonds increase bond yields? Is it that they have to raise yields to keep it attractive?

bizaro86 explained it well.

The Bank of Canada bought up a ton of government bonds during COVID which dropped yields, freed up commercial banks' assets (by shifting things from bonds to cash), and provided the government with money to finance its stimulus and supports. Basically they wanted all those things to happen to stimulate the economy to prevent a severe recession. It worked relatively well, but we're also experiencing the aftereffects of that with high inflation and inflated asset prices in the couple of years since.

But since the end of 2021, they've been reducing their holdings, because it was never the plan to permanently have the BoC hold hundreds of billions of dollars in government bonds. So they've been selling and/or not renewing bonds (the latter of which means the government must find another buyer for their newly issued bonds) and have now rolled off about 40% of their peak holdings. But the result of that is that yields end up higher because they need to attract new buyers for what is a pretty significant amount of bonds, so the yield goes up (because the price goes down; price and yield are inversely related). They're trying to manage the timeline to not mess things up too much (i.e. they could flood the market with all their holdings, but yields would skyrocket), but while still not holding the bonds for years and years.

But obviously that's only one part of it, as there are lots of other things that go into bond yields. So essentially, yields are higher than they would be in the counterfactual where the BoC wasn't liquidating a ton of bonds. But it's still totally possible for yields to drop while they're selling them off due to other factors, like a recession, expected drop in policy rate, capital movement towards less risky assets if there's some kind of crisis, etc.

[BagoPucks]

Thank you fellow CPers I skipped the class on bonds in school clearly

[chemgear]

https://financialpost.com/news/econo...lion-last-year

Canada's population grew by more than a million last year, the highest growth rate in decades

“If the rate of population growth seen this past year remained constant in the future, it would lead to the Canadian population doubling in 25 years,” said a report released by Statistics Canada on Sept. 27. “Close to 98 per cent of the growth in the Canadian population from July 1, 2022, to July 1, 2023, came from net international migration, with two per cent coming from the difference between births and deaths.”

The large increase in immigration comes as the country tries to tackle a housing crisis. Aside from encouraging developers to build more houses, the government could consider placing a cap on the annual number of international students, Housing Minister Sean Fraser said in August, although no such plan has been drafted yet.

A Toronto-Dominion Bank report in July said the housing shortage could widen by an additional 500,000 units within two years if immigration levels continue at their current rate.

Robert Kavcic, a senior economist at the Bank of Montreal, said the latest population numbers weren’t surprising, but the growth puts a lot of immediate stress on things such as housing, services and infrastructure.

[Yoho]

https://twitter.com/user/status/1708855723629670406

https://twitter.com/user/status/1708806784809308640

[Yoho]

https://twitter.com/user/status/1709946562372309144

[chemgear]

Too many people getting raises and not enough layoffs.


https://financialpost.com/news/econo...interest-rates

Growing wages may force Bank of Canada to raise interest rates again

Wages continued to grow in September, extending a trend that will help households cope with higher prices, but could also force the Bank of Canada to hike interest rates again to reverse stubbornly strong inflationary pressure.

Average hourly wages rose five per cent from September 2022, according to Statistics Canada’s latest monthly tally of the labour market, marking the seventh consecutive month that paycheques increases faster than prices, as measured by Statistics Canada’s consumer price index.

Canadian employers also added some 64,000 positions last month, triple the Bay Street consensus, according to a Bloomberg survey of professional forecasters. The jobless rate was unchanged at 5.5 per cent, which is up from the recent low of around five per cent, but still a historically strong number that suggests the economy continues to have decent momentum.

[bizaro86]

Originally Posted by chemgear

marking the seventh consecutive month that paycheques increases faster than prices,

It drives me crazy when this gets reported as being an issue.

Real wage growth is a huge benefit to a society.

[iggy_oi]

Originally Posted by bizaro86

It drives me crazy when this gets reported as being an issue.

Real wage growth is a huge benefit to a society.

The businesses that are too profitable to shut down, unable to automate or not able to outsource their work had to come up with a way to try and convince their workers that making more money would be bad for them.

[calgarygeologist]

Originally Posted by iggy_oi

The businesses that are too profitable to shut down, unable to automate or not able to outsource their work had to come up with a way to try and convince their workers that making more money would be bad for them.

Businesses? Why blame the businesses when it was the Bank of Canada coming out and providing guidance on wages and telling everyone that wage growth was going to drive up inflation. This narrative is on Macklem and his buddies.

"We need to see some easing in the labour market to take out those wage and price pressures and bring inflation back to target," said Macklem. "Companies are using the temporary foreign worker program more. That is probably helping ease this tightness in the labour market."

Macklem also repeated the idea expressed by some other critics that rising wages were not justified by current increases in productivity, roughly defined as the amount of economic growth per unit of input.

"Wage growth has been running at four to five per cent and unless there's a surprising acceleration in productivity, that's not consistent with two per cent inflation," said Macklem.

"The Bank of Canada continues to point to wage increases as a culprit in inflation when in fact what we're seeing is profiteering and supply-chain bottlenecks are the real culprit."

[iggy_oi]

Originally Posted by calgarygeologist

Businesses? Why blame the businesses when it was the Bank of Canada coming out and providing guidance on wages and telling everyone that wage growth was going to drive up inflation. This narrative is on Macklem and his buddies.

Because this isn’t the only instance or even recent example of trying to mislead people into believing that having more money will be a bad thing for them. Politicians and media shills are pushing the same message too and have been for years.

[bizaro86]

I don't think businesses control the bank of Canada's actions or messaging. Because I assure you if that was the case interest rates would be lower right now.

But I definitely agree the BoC shouldn't try to fight inflation on the backs of labour. Real wage growth is highly desirable because that's how people end up better off.

If they want to jawbone someone into helping fight inflation they should look to the Feds. Continued significant deficit spending after the economic crisis is well over is very inflationary, and is working strongly against the BoC. If the feds would run a surplus for a couple of years the issue would be resolved.

[calgarygeologist]

Originally Posted by iggy_oi

Because this isn’t the only instance or even recent example of trying to mislead people into believing that having more money will be a bad thing for them. Politicians and media shills are pushing the same message too and have been for years.

Sure, but currently it is the BoC that is going to war with workers and wages.

[iggy_oi]

Originally Posted by calgarygeologist

Sure, but currently it is the BoC that is going to war with workers and wages.

Good one.

[Whynotnow]

Originally Posted by bizaro86

I don't think businesses control the bank of Canada's actions or messaging. Because I assure you if that was the case interest rates would be lower right now.

But I definitely agree the BoC shouldn't try to fight inflation on the backs of labour. Real wage growth is highly desirable because that's how people end up better off.

If they want to jawbone someone into helping fight inflation they should look to the Feds. Continued significant deficit spending after the economic crisis is well over is very inflationary, and is working strongly against the BoC. If the feds would run a surplus for a couple of years the issue would be resolved.

Yeah but what is the realistic path to surplus budgets for any government right now? Either massive tax increases or spending cuts, which has a similar effect to the taxpayers.

[Yoho]

https://twitter.com/user/status/1712931211536892240

[Yoho]

Just in a little Gully.

https://twitter.com/user/status/1716666227098095849

[MillerTime GFG]

Well no increase today, with the BoC of course leaving the door open that they "could" raise rates at a later date. Still anticipating rates to start coming down Q4 2024.

While bonds should have reacted positively to this news, they're actually up today. Bond vigilantes/selloffs driving 5-year bonds up today, which fixed rates follow.

[chemgear]

Gotta buy those votes.

https://calgaryherald.com/news/polit...d-9b289e198788

Government spending is putting upward pressure on inflation, Bank of Canada's Macklem says

Bank of Canada governor Tiff Macklem says fiscal and monetary policy are rowing in opposite directions, making it harder to bring inflation down.

In response to questioning from Conservative MP Jasraj Singh Hallan, Macklem said government spending is working at cross purposes with the central bank’s efforts to bring inflation down.

The governor said that according to federal and provincial budgets, government spending aggregate will grow faster than supply in the economy over the next year, adding upward pressure to inflation.