Posted by: Daryl & Wendy Ashby | May 8, 2010

I Told Ya

No one foresaw this degree of job creation. April’s 109,000 new jobs set a record for a single month and crushed economists’ median estimate of 25,000.

In percentage terms, it was the biggest monthly employment gain since 2002. Canada has now regenerated two-thirds of the jobs it shed in the recession.

Given this strength, inflation risks are once again top of mind.

After yesterday’s jobs report, every major securities dealer is now predicting a 1/4 point rate hike in June, July and September (source: Reuters). By the end of this year, securities dealers’ forecast a 1.25 percentage point increase in the overnight rate.

National Bank economist, Yanick Desnoyers, says “a rate hike in June is a done deal,” baring unforeseen events. In just over three weeks we’ll find out if he and his peers are right.

All this comes on the heals of the TD Canada Trust having trimmed its posted 5-year fixed rate by 15 basis points, from 6.25% to 6.10% on Thursday last.

Bond yields are down 30 basis points from the last time fixed rates increased on April 26. And while bond yields generally lead fixed-mortgage pricing, but not always on a one-to-one basis.


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