Staff analytical notes are short articles that focus on topical issues relevant to the current economic and financial context.
234
result(s)
Does US or Canadian Macro News Drive Canadian Bond Yields?
Staff Analytical Note 2018-38
Bruno Feunou,
Rodrigo Sekkel,
Morvan Nongni-Donfack
We show that a large share of low-frequency (quarterly) movements in Canadian government bond yields can be explained by macroeconomic news, even though high-frequency (daily) changes are driven by other shocks. Furthermore, we show that US macro news—not domestic news— explains most of the quarterly variation in Canadian bond yields.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial markets,
International topics,
Monetary policy
JEL Code(s):
C,
C2,
C22,
E,
E4,
E43
Markets Look Beyond the Headline
Staff Analytical Note 2018-37
Bruno Feunou,
James Kyeong,
Raisa Leiderman
Many reports and analyses interpret the release of new economic data based on the headline surprise—for instance, total inflation, real GDP growth and the unemployment rate. However, we find that headline news alone cannot adequately explain the responses of market prices to new information. Rather, market prices react more strongly, on average, to non-headline news such as the composition of GDP growth, quality of jobs created and revisions to past data. Thus, tracking the impact of non-headline information released on the news day is crucial in analyzing how markets interpret and react to new economic data.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Asset pricing,
Exchange rates,
Interest rates
JEL Code(s):
E,
E4,
E43,
G,
G1,
G12,
G14
Modelling the Macrofinancial Effects of a House Price Correction in Canada
Staff Analytical Note 2018-36
Thibaut Duprey,
Xuezhi Liu,
Cameron MacDonald,
Maarten van Oordt,
Sofia Priazhkina,
Xiangjin Shen,
Joshua Slive
We use a suite of risk-assessment models to examine the possible impact of a hypothetical house price correction, centred in the Toronto and Vancouver areas. We also assume financial stress significantly amplifies the macroeconomic impact of the house price decline.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial institutions,
Financial stability,
Housing
JEL Code(s):
E,
E2,
E27,
E3,
E37,
E4,
E44,
G,
G2,
G21
The Impact of Recent Policy Changes on the Canadian Mortgage Market
Staff Analytical Note 2018-35
Olga Bilyk,
Maria teNyenhuis
Recent policy changes are having a clear impact on the mortgage market. The number of new, highly indebted borrowers has fallen, and overall mortgage activity has slowed significantly.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Credit and credit aggregates,
Financial institutions,
Interest rates,
Recent economic and financial developments
JEL Code(s):
D,
D1,
E,
E4,
G,
G2,
G21,
G28
Characterizing the Canadian Financial Cycle with Frequency Filtering Approaches
Staff Analytical Note 2018-34
Andrew Lee-Poy
In this note, I use two multivariate frequency filtering approaches to characterize the Canadian financial cycle by capturing fluctuations in the underlying variables with respect to a long-term trend. The first approach is a dynamically weighted composite, and the second is a stochastic cycle model.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Business fluctuations and cycles,
Econometric and statistical methods,
Financial stability,
Monetary and financial indicators,
Recent economic and financial developments
JEL Code(s):
C,
C0,
C01,
C1,
C13,
C14,
C18,
C3,
C32,
C5,
C51,
C52,
E,
E3,
E32,
E6,
E66,
G,
G0,
G01,
G1,
G18
Introducing a Systematic Measure of Idiosyncratic Prices
Staff Analytical Note 2018-33
Madigan Dockrill,
Laurence Savoie-Chabot
There is a risk that Bank of Canada staff may inadvertently be biased when analyzing inflation: when inflation surprises on the downside, staff might emphasize negative idiosyncratic factors. When inflation surprises on the upside, staff might emphasize the positive idiosyncratic factors.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Inflation and prices,
Recent economic and financial developments
JEL Code(s):
E,
E3,
E31
Disaggregating Household Sensitivity to Monetary Policy by Expenditure Category
Staff Analytical Note 2018-32
Tony Chernis,
Corinne Luu
Because the Bank of Canada has started withdrawing monetary stimulus, monitoring the transmission of these changes to monetary policy will be important. Subcomponents of consumption and housing will likely respond differently to a monetary policy tightening, both in terms of the aggregate effect and timing.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Business fluctuations and cycles,
Domestic demand and components,
Econometric and statistical methods,
Housing,
Interest rates,
Monetary policy transmission,
Recent economic and financial developments
JEL Code(s):
C,
C3,
C32,
E,
E2,
E21,
E22,
E4,
E43,
E47,
E5,
E52
Have Liquidity and Trading Activity in the Canadian Corporate Bond Market Deteriorated?
Staff Analytical Note 2018-31
Chen Fan,
Sermin Gungor,
Guillaume Nolin,
Jun Yang
Since 2010, the liquidity of corporate bonds has improved on average, while their trading activity has remained stable. We find that the liquidity and trading activity of riskier bonds or bonds issued by firms in different sectors have been stable. However, the liquidity and trading activity of bonds issued by banks have improved. We observe short-lived episodes of deterioration in liquidity and trading activity.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial markets
JEL Code(s):
G,
G1,
G12,
G14
Have Liquidity and Trading Activity in the Canadian Provincial Bond Market Deteriorated?
Staff Analytical Note 2018-30
Chen Fan,
Sermin Gungor,
Guillaume Nolin,
Jun Yang
In recent years, the liquidity in the secondary market for Canadian provincial bonds was a concern for many market participants. We find that a proxy for the bid-ask spread has deteriorated modestly since 2010. However, a proxy for price impact as well as measures of trade size, the number of trades and turnover have been stable or improved since 2010. This holds for bonds issued by different provinces and for bonds of different ages and sizes. Alberta bonds provide an interesting case study: After the fall in oil prices in 2014–15, the province increased its borrowing in the bond market and its credit rating was downgraded. Yet trading activity for Alberta bonds increased significantly. Overall, we interpret the evidence as a sign of resilience in the provincial bond market.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial markets
JEL Code(s):
G,
G1,
G12,
G14