HIGHLIGHTS OF THE WEEK – Feb 17

United States

• The risk-off sentiment was palpable through much of the week, as equites and oil sold off, while safe heaven assets rallied. Markets have recovered some ground on Friday, following better-than-expected retail sales report which helped to dissuade fears about the health of the U.S. economy.

• Another key concern among investors this week was the health of the financial institutions in the environment of low and, in some cases, increasingly negative interest rates. This week Swedish Riksbank has pushed further into negative territory, while the ECB is expected to follow suit next month.

• Deteriorating financial conditions and increased risks to growth were highlighted by Janet Yellen this week. These will likely slow the pace of rate normalization; however, given that the U.S. economy remains in solid shape, we expect that the Fed will still be able to deliver two more quarter-point hikes later this year.

Canada

• In a relatively quiet data week, Canadian financial markets took their cue from global events and Janet Yellen’s comments. The yield curve in Canada is basically flat as markets are pricing in a high probability that downside economic risks materialize.

• Looking past recent market volatility, we are still of the view that the Canadian economy will continue to grow in 2016 and the Bank of Canada will remain on hold. Canadian real GDP growth should pick up to a healthy 1.8% on average per quarter through 2016, supported by still decent growth in the U.S. economy and the lagged impact of recent strength in housing demand.

For further information, please contact:

John Maveety Manager, Residential Mortgages – Greater Ottawa Area TD Canada Trust
T: (613) 371-1984 F: (888) 899-1984 P: (866) 767-5446
John.Maveety@td.com