Daily Market Color

Bank of Canada First to Wind Down Quantitative Easing

Rates hold ground despite Bank of Canada announcement
The Bank of Canada became the first major central bank to announce a wind down in monetary stimulus, saying today that they would pare back purchases of government debt by 25% and potentially accelerate a timetable for rate hikes. While that news initially led to a sell-off in Treasurys, it was quickly offset by a strong 20-year bond auction that was met with robust demand. The 10-year Treasury yield would ultimately end the day little changed at 1.55% while the S&P 500 and DJIA climbed ~0.9%.
3-month LIBOR falls to record low
After falling for four days in a row, 3-month LIBOR dropped 1.1 bps to 0.17228%, and the LIBOR-OIS spread narrowed to the lowest level since 2010.  The Fed’s accommodative monetary policy and the Treasury’s reduction of its cash balance have kept borrowing costs near zero and put continued pressure on LIBOR.
Mortgage Bankers Association reports mortgage demand rose 8.6% last week
After mortgage rates fell to their lowest level in over two months, application volume jumped last week for the first time since February.  Despite the recent slowdown in home sales caused by rising prices and low supply, mortgage applications to purchase a home rose 6% last week and are roughly 57% higher than a year ago.

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