When the U.S. Federal Reserve met last week, it did as markets expected and decided to continue buying $85 billion of newly issued U.S. Treasury debt each month. To put that number in perspective, the Fed is now buying almost all of the new debt issued by the U.S. Treasury. This means that the U.S. federal government is financing its massive deficits in a closed system that is not subject to market forces. In simple terms, today, when the U.S. government needs more money, it simply sends the bill to the U.S. Treasury department, which then calls the Fed and asks it to fire up the printing presses for the required amount. (Preliminary calls like this are a good idea because it’s hard to keep enough ink on […]

The Bank of Canada Finally Drops Its Rate-Tightening Bias - Monday Morning Interest Rate Update (October 28, 2013)

Last week the U.S. government ended its budget crisis and avoided defaulting on its debt, but this much needed reprieve will be short lived. While the U.S. Congress finally passed a bill to reopen the government and raise the U.S Treasury’s debt ceiling, it only gave the U.S. government enough money to stay open until January 15, 2014, and only gave the Treasury enough breathing room to keep borrowing until February 7, 2014. Instead of being a lasting resolution, this latest development was just a pause in the action, like the time keeper’s bell going off in the middle round of an eighteen-round fight. Republicans and Democrats merely returned to their corners, where they now wait to be called out for their next round of budgetary brinkmanship. I […]

What Permanent QE Would Mean for Canadian Mortgage Rates - Monday Morning Interest Rate Update (October 7, 2013)

As Sovereign Default Fears Rise, Fixed Mortgage Rates Set to Fall - Monday Morning Interest Rate Update (September 30, 2013)

The U.S Fed Trades Short-Term Gain for Longer-Term Pain - Monday Morning Interest Rate Update (September 23, 2013)

The Elephant in the Room - Monday Morning Interest Rate Update (September 16, 2013)

What the Latest U.S. and Canadian Economic News Means for Canadian Mortgage Rates - Monday Morning Interest Rate Update (September 9, 2013)