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Weekly Digest — June 2nd, 2023

13 Jun Weekly Digest — June 2nd, 2023

Posted at 17:59h in Blog by

The Debt Ceiling?

The “Debt Ceiling” is the maximum amount of money Congress allows the federal government to borrow to cover its bills (CNBC).

Because the government spends more money than it collects in taxes, it must take out debt to pay its expenses. Prior to 1917, Congress needed to approve additional debt for each new spending measure it passed. Congress has lifted the debt limit 78 times since 1960.

The debt ceiling was last raised in December 2021 by $2.5 trillion, capping the limit at $31.381 trillion.

Why does it always passes through Congress?:

  • Defaulting on sovereign debt would wreak havoc on the economy and shake up markets around the world.

  • Billions of dollars in government payments would stop; Social Security benefits, Medicaid payments, Veterans’ Benefits, Federal Government salaries etc.

With a cap on the debt ceiling, this would have a silver lining to curb US spending. Less spending = disinflation.

 

GDP Numbers

Inflation and GDP are outperforming the Bank of Canada’s expectations. Ottawa’s fiscal spending and support has been far too generous, and Canadian’s still have too much access to credit.

Canada’s GDP numbers grew 3.10% in the first quarter, which out paced the 2.50% forecast.

 

What Happens Next Week?

The next Bank of Canada meeting is scheduled for June 7th. Markets are pricing in a 33% chance of BoC hike. Once the May housing reports are released (which will see large gains to prices), BoC will have some tough decisions to make before the end of the calendar year.

 

Is the Labour Market Starting to Crack?

RBC put together a great report on five reasons why the labour markets might not be as solid as they are made to be;

  1. Hiring demand is beginning to slow

  2. Layoffs are increasing

  3. Fewer workings are quitting their jobs for other opportunities

  4. Temp agency work is declining

  5. Job openings are slumping in Canada

Before any rate cut will occur, our low unemployment rate needs to increase. Could this be the start of trend to recessionary pressures?

 

Current Interest Rates

 

CONVENTIONAL

  • 5 year fixed, 30 yr amortization – 5.14%

  • 3 year fixed, 30 yr amortization – 5.34%

  • 5 year variable, 30 yr amortization – Prime – 0.60% = 6.10%

  • 5 year fixed, 25 yr amortization – 5.14%

  • 3 year fixed, 25 yr amortization – 5.34%

  • 5 year variable, 25 yr amortization – Prime – 0.70% = 6.00%

 

INSURED

  • 5 year fixed, 25 yr amortization – 5.04%

  • 4 year fixed, 25 yr amortization – 5.19%

  • 3 year fixed, 25 yr amortization – 5.34%

  • 5 year variable, 25 yr amortization – Prime – .90% = 5.80%

 

Fast Facts

  • 10,000 metres – That’s the depth of a hole Chinese researchers plan to drill to explore the Earth’s resource riches.

  • $596,000 USD – That’s how much Kurt Cobain’s guitar sold for at auction – nearly 10 times more than the opening price.