McCreath: Bonds, currencies most impacted by Fed's rate decision
Canada’s top banking regulator is undoing one of the emergency measures brought into place at the onset of the COVID-19 pandemic. The Office of the Superintendent of Financial Institutions announced this morning the domestic stability buffer will more than double as of Oct. 31. That buffer can be thought of as a rainy day fund to ensure the banks are able to keep lending at times of stress, like what we saw early in the pandemic. And back then, OSFI slashed the rate in a move that it said would free up $300 billion in lending capacity. Now, OSFI is saying it’s raising the buffer because economic and market disruptions have been abated.
INVESTORS REACT TO FED DECISION
It’s official: The U.S. Federal Reserve has started talking about talking about an eventual taper. That much was clear in Chair Jerome Powell’s remarks to the media yesterday when he attempted to distract everyone from a dot plot that suggests the Fed is on course to raise rates twice by the end of next year. Instead, he said, “it’s all about asset purchases” for the central bank, and that the key decision makers had a discussion about the path of quantitative easing. As for the dots (which show nearly half of the FOMC expect one rate hike this year): Bloomberg’s Vince Cignarella called them “a complete waste of time” when he joined Greg off the top of The Close. We’ll see how investors make sense of this all, and consider if Powell can successfully steer attention away from the dots. We’ve got former Fed Vice-Chair Alan Blinder lined up for 2:30 p.m. today.
TERRA NOVA SPARED FROM SHUTDOWN (FOR NOW)
Suncor Energy announced an agreement in principle late yesterday that essentially keeps the offshore oilfield on life support. Under the arrangement, Suncor will boost its stake to 48 per cent from 38 per cent, and the ownership consortium will provide the necessary funding before a more difficult decision on sanctioning an extension is made in the fall. Newfoundland and Labrador’s premier and energy minister cheered the news, saying in a statement the government (which is on the hook for $500 million in financial support) is “optimistic there will be even brighter days ahead.”
OTHER NOTABLE STORIES
- Pembina Pipeline and TC Energy this morning announced plans to co-develop a carbon sequestration project that they say would be capable of move 20 million tonnes of carbon dioxide every year. It looks to be largely a matter of retrofitting existing pipelines. I don’t see a precise capital cost, though the companies say their plan would entail a “multi-billion-dollar incremental investment."
- BHP Group talked up a bullish view on potash today, with a supportive tone about the future of its Jansen mine in Saskatchewan, saying that multi-billion-dollar project “fits our framework” while cautioning that the capital deployment has to make sense before signing off on a final investment decision.
- Algonquin Power & Utilities is on our radar today after it announced a plan to raise $900 million to finance green energy projects and technologies.
- Notable data: Canadian international securities transactions, Teranet/National Bank home price index; U.S. initial jobless claims
- 9:00: Office of the Superintendent of Financial Institutions releases semi-annual domestic stability buffer announcement
- 9:00: Newfoundland and Labrador Premier Andrew Furey and Energy Minister Andrew Parsons hold media avail
- 10:00: U.S. Treasury Secretary Janet Yellen addresses U.S. House Ways and Means Committee
- 11:00: U.S. Senate Majority Leader Chuck Schumer speaks on Canada-U.S. tourism industry panel re. border restrictions
- 13:00: Ontario Deputy Premier and Health Minister Christine Elliott and Solicitor General Sylvia Jones deliver update on vaccination plan