|Bid||96.62 x 0|
|Ask||96.63 x 0|
|Day's Range||95.60 - 96.92|
|52 Week Range||86.25 - 109.00|
|Beta (3Y Monthly)||1.32|
|PE Ratio (TTM)||10.22|
|Forward Dividend & Yield||4.12 (4.27%)|
|1y Target Est||N/A|
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. The Federal Reserve took action to calm money markets, injecting billions in cash to quell a surge in short-term rates that was pushing up its policy benchmark rate and threatening to drive up borrowing costs for companies and consumers. The central bank also said it would do more Wednesday.While the spike wasn’t evidence of any sort of imminent financial crisis, it highlighted how the Fed was losing control over short-term lending, one of its key tools for implementing monetary policy. It also indicated Wall Street is struggling to absorb record sales of Treasury debt to fund a swelling U.S. budget deficit. What’s more, many dealers have curtailed trading because of safeguards implemented after the 2008 crisis, making these markets more prone to volatility.Money markets saw funding shortages Monday and Tuesday, driving the rate on one-day loans backed by Treasury bonds -- known as repurchase agreements, or repos -- as high as 10%, about four times greater than last week’s levels, according to ICAP data.More importantly, the turmoil in the repo market caused a key benchmark for policy makers -- known as the effective fed funds rate -- to jump to 2.25%, an increase that, if left unchecked, could have started impacting broader borrowing costs in the economy. Because that’s at the top of the range where Fed officials want the rate to be, they are likely to make yet another tweak to a key part of their policy tool set -- something called the interest on excess reserves rate -- to try to get things back on track when they meet Wednesday to set their benchmarks.But the central bank didn’t wait until then to do something, resorting to a money-market operation it hasn’t deployed in a decade. The New York Fed bought $53.2 billion of securities on Tuesday, hoping to quell the liquidity squeeze. It appeared to help. For instance, the cost to borrow dollars for one week while lending euros retreated after almost doubling Monday.Late Tuesday, the New York Fed said it would conduct another overnight repo operation of up to $75 billion Wednesday morning.For repo traders, hedge funds and others that rely on that market for financing, the intervention came none too soon.“There’s been a sea change in markets, and it’s one the Fed needed to respond to,” said Lou Crandall of Wrightson ICAP. “In the current market environment, there is just not enough elasticity in the repo market to handle the big seasonal swings of the banking system. The Fed needed to come in now and alleviate the immediate problem, while it is also working on long-term solutions.”The central bank has considered introducing a new tool, an overnight repo facility, that could be used to reduce pressure in money markets. No decision has been announced. Another long-term remedy would be growing the Fed’s balance sheet again to permanently increase reserves in the banking system. But for now, if the rate remains elevated, expect more temporary liquidity injections, Crandall said.The New York Fed declined to comment on the events of this week.Actions like the Fed took Tuesday were once commonplace, but stopped being so when the central bank expanded its balance sheet and started using a range of rates to implement its policy in the aftermath of Lehman Brothers’ 2008 collapse.Securities eligible for collateral in the Fed operation include Treasuries, agency debt and mortgage-backed securities. In an overnight system repo, the Fed lends cash to primary dealers against Treasury securities or other collateral.Surges in the repo rate normally occur only at quarter-end and sometimes month-end. This mid-month surge was attributed to a confluence of events that knocked cash reserves in the banking system out of balance with the volume of securities on dealer balance sheets: a corporate tax payment date, settlement of last week’s Treasury auctions, and last week’s bond-market sell-off, in which investors sold securities back to dealers.“This is certainly painful for firms that have to fund positions,” said Thomas Simons, an economist at Jefferies LLC. “So it’s difficult for the dealer community. But it’s not systemically threatening.”Beyond the technical forces driving the spike in repo rates, the move is also a sign that excess reserves in the banking system are dwindling, according to Tom di Galoma, managing director of government trading and strategy at Seaport Global Holdings LLC.“This made the repo market ripe for dislocation,” he said.\--With assistance from Matthew Boesler and Elizabeth Stanton.To contact the reporters on this story: Liz Capo McCormick in New York at firstname.lastname@example.org;Alexandra Harris in New York at email@example.comTo contact the editors responsible for this story: Benjamin Purvis at firstname.lastname@example.org, Nick Baker, Mark TannenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
You won't find many dividend streaks more impressive than Bank of Montreal (TSX:BMO)(NYSE:BMO), or Imperial Oil Limited (TSX:IMO)(NYSE:IMO).
(Bloomberg) -- A team of Bank of Montreal commercial bankers have traded their suits and ties for Ford F-150 pickups to reach Canada’s remote regions and build up a part of their business that has yet to see a bad loan.Indigenous banking is one area Chief Executive Officer Darryl White targeted in June when he vowed increased support for small-business lending and sustainable finance, as well as inclusiveness and diversity. The Toronto-based bank plans to double the size of its C$4.4 billion ($3.4 billion) book of indigenous commercial loans, deposits and investments by 2025.“We should actually exceed that by a bit,” Stephen Fay, head of indigenous banking, said in an interview at his Toronto office. “I’m confident we can do it just by doing what we’ve done in the past.”Fay thinks he can beat his boss’s target even as he faces competition to reach the indigenous population, Canada’s fastest-growing group, from rivals including Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce, as well as new entrants such as private lender Bridging Finance Inc. Growth at Bank of Montreal’s division has been about 21% so far this fiscal year, surpassing its historical pace and above Fay’s annual goal of 19%.Bank of Montreal started an aboriginal banking unit in 1992 with Ron Jamieson, a Mohawk from Six Nations Reserve in Ontario, running the business. He led a lean operation in the early years, with a handful of bankers lending, gathering deposits and establishing on-reserve housing-loan programs. Then Fay was tapped for a commercial-banking deal, his area of expertise.“I was able to do an infrastructure deal there,” Fay, 62, said. “It took me about six months of hard work trying to gain their trust, but we were successful and Ron liked how I did it.”Isolated AreasJamieson asked Fay to join his team. Fay has headed the unit since 2009, and now oversees eight dedicated bankers across Canada, who are supported by about 60 account managers along with experts from other parts of the bank.Clients are not always easy for the bankers to reach. In Quebec, for example, Bank of Montreal has on-reserve branches at Wemindji and Waskaganish on the James Bay coast, two remote communities linked by a road that takes eight hours to traverse.“All, with the exception of one, have an F-150 because what I found was the previous vehicles we were giving them when they were going into these remote communities would get damaged on some of the roads,” Fay said.Success requires doing things differently: ditching neckties and forgoing email, and instead traveling to indigenous communities for face-to-face meetings -- and listening, Fay said.“Picking up the phone and using text is not going to work,” he said. “You go into the community and spend time talking to people. You may not even talk about business in the first one or two visits, but you’re going to get to know people and build that trust and then try and find a way to provide value.”Membertou First Nation, an urban Mi’kmaq community of 1,700 on the east coast’s Cape Breton Island, has dealt with Bank of Montreal for almost a decade, a relationship that began with a cold call from Fay, said Mike McIntyre, Membertou’s chief financial officer.Sports ComplexThe two built up a dialogue and the first deal was a C$700,000 loan to buy a garage for housing public-works equipment, McIntyre said. The bank has since provided more than C$20 million for on-reserve housing, fishing boats and a sports complex.“They get it,” McIntyre said. “These guys are sincere and the people they have working for them strictly deal with First Nation banking.”The biggest deal for Bank of Montreal’s indigenous banking unit this year was about C$80 million, involving a real estate development in western Canada. About 70% of the unit’s loans are less than C$20 million. Other areas of banking include providing on-reserve home loans, cash-management services, infrastructure finance and helping indigenous groups with land-claims settlements, which have resulted in trusts that spin off income.The bank has set up 122 on-reserve housing-loan programs, an initiative started in 1995 and designed to permit loans even with Indian Act restrictions on land ownership and mortgages. Under the programs, the borrowing risk falls to both the bank and the community.Indigenous banking has also proven to be a low-risk venture, more akin to lending to cities and other governments since the main borrowers are the band or wholly owned entities.“We’ve had no write-offs and, if you ask the other banks, they’ll tell you the same thing,” Fay said. “We look at First Nations or indigenous governments as a government: They’ve got elected chiefs and councils, they are here for the long haul and are not going to go away.”To contact the reporter on this story: Doug Alexander in Toronto at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, ;David Scanlan at email@example.com, Daniel Taub, Jacqueline ThorpeFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. The Bank of Canada resisted pressure from investors to signal it will soon follow global peers in easing monetary policy.At a decision Wednesday, policy makers left interest rates unchanged for a seventh straight meeting and surprised markets by asserting current levels of stimulus are still appropriate despite the escalating trade war between China and the U.S..The Bank of Canada’s reluctance to signal a greater willingness to cut rates has made the central bank an outlier as counterparts around the world ease policy. Investors and analysts had expected more dovish language, paving the way for some easing later this year. The Canadian dollar rose after the statement.“This is a bit more hawkish than we anticipated,” said Brett House, deputy chief economist at Bank of Nova Scotia.To be sure, the door is still open for increased stimulus given how much the central bank underlined trade risks. Policy makers also said Canadian growth is likely to slow in the second half of this year. Investors are anticipating the Bank of Canada will eventually be forced to join other central banks like the Federal Reserve in cutting rates, as soon as next month.‘Note Committing’But Wednesday’s statement suggests the central bank remains reluctant to show its hand on the matter, preferring instead to wait for more concrete signs of weakness before moving.“The Bank is not committing to anything,” Doug Porter, chief economist at Bank of Montreal, said in a note to investors.The Canadian dollar rose 0.8% to C$1.3237 per U.S. dollar at 12:14 p.m. Swaps trading suggests investors are fully pricing in a cut by December, with strong odds of a second reduction by this time next year. That’s still less than the four rate cuts priced by the Federal Reserve over that time.Canada’s benchmark S&P/TSX Composite Index pared an earlier gain to 0.5% after the statement, which the market saw as “largely one of disappointment,” according to Candice Bangsund, portfolio manager at Fiera Capital.The case for cheaper money isn’t as compelling in Canada as it is elsewhere. A strong run of economic data affords the Bank of Canada opportunity to resist -- as it has so far -- the dovish turn in global policy.Interest rates also remain stimulative in real terms, even with the Bank of Canada on hold, mortgage rates have already fallen sharply in recent months because of the decline in global bond yields. In other words, there is plenty of stimulus in the system that the Bank of Canada already needs to keep in mind -- a development the Bank of Canada cited in its statement.“In sum, Canada’s economy is operating close to potential and inflation is on target. However, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies,” the central bank said in its statement. “In this context, the current degree of monetary policy stimulus remains appropriate.”Global OutlookBut escalating tensions between China and the U.S. are hard to overlook. The trade war is impacting global economic momentum more than it had projected in July, and driving lower commodity prices, the Bank of Canada said. So, officials will need to pay close attention to “global developments and their impacts on the outlook for Canadian growth and inflation.”Waiting too long is a risky strategy, however. It could backfire if policy makers are late to recognize spillover effects on businesses and households, particularly since the country’s outlier status on policy could potentially fuel gains in the Canadian dollar.“The Bank of Canada is stalling but it will eventually be peer-pressured into interest-rate cuts,” Frances Donald, chief economist at Manulife Investment Management Ltd., told BNN Bloomberg.(Updates with market reaction, comment in 9th paragraph.)\--With assistance from Erik Hertzberg and Divya Balji.To contact the reporter on this story: Theophilos Argitis in Ottawa at firstname.lastname@example.orgTo contact the editors responsible for this story: Theophilos Argitis at email@example.com, Chris Fournier, Stephen WicaryFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.