The banks have had a long run of strong profits but the good times are about to become a little less so, according to Ed Clark, chief executive of Toronto-Dominion Bank.
Europe remains in a shambles, the U.S. still hasn’t recovered, while in Canada strong tailwinds such as the housing market have turned into headwinds. But the real challenge, “the underlying issue” is what’s going to happen to interest rates, Mr. Clark told RBC Capital Markets’ annual bank CEO conference in Toronto on Tuesday.
TORONTO — The Canadian dollar drifted lower Wednesday morning amid general U.S. dollar strength.
The loonie was down 0.07 of a cent to 91.27 cents US to levels last seen in September 2009.
The new year is only two weeks old and the loonie has already fallen 3.1%, making it the worst performing primary currency.
The reasons for the decline are many. One is that the greenback has gained in value as the Federal Reserve starts to back away from its massive monthly bond purchases.
The big story in economics is the recent rise in interest rates. In just the past several weeks, as talk has grown about reducing the pace of bond purchases via quantitative easing, yields on the US 10-year have surged past 2.5%. Very recently they were barely above 1.5%.
Another day, another low volume overnight meltup to record highs in equity futures. Stocks traded higher in Europe this morning, with tech stocks outperforming following reports that Apple has finally secured a deal to bring the iPhone to China Mobile, which has more than 750 million subscribers. As a result, the likes of ARM Holdings and STMicro traded with gains of over 2% and Apple's German listing traded up around 2.5%.
Anyone who has been following global financial markets over the past month or so will have easily flagged the sell-off in the U.S. Treasury market as a major event that has been felt around the world. Even more important than the price action in Treasuries itself, though, is how volatility in the market has risen. The chart below shows the percentage increase in both Treasury yields and volatility of Treasury yields since the beginning of May, when the big sell-off in the bond market began. Since May 2, yields have risen 34%, while volatility is up 64%.
David Hunkar submits: The Shanghai SE Composite Index is down 17.71% Year-To-Date (YTD) and is flirting with bear market territory. While many of the Chinese investors are afraid of the market now, some see this plunge as a good time to enter the market. The optimists reason that it is not worth keeping money in banks due to the low interest rates and investments in real estate are not wise either since prices have skyrocketed.