Toronto-Dominion Bank

The Bank of Canada cut its key interest rate. Although the rate cut intends to boost the economy, it’s also fueling the housing bubble.

Flows into investment-grade bond funds were positive last week. Investment-grade bond funds saw net inflows of $907.1 million during the week ending July 6.

On October 1, Nordstrom (JWN) announced the completion of the sale of its credit card portfolio to Toronto-Dominion Bank (TD), also known as TD Bank.

Running a credit card division locks up some of a retailer’s capital and resources. Nordstrom’s credit card portfolio sale will let it focus on its core retail business.

The “Big Six Banks” in Canada have only reduced their prime rates by 15 basis points. So the spread between the prime and key interest rates is now 0.1%.

Visa Inc (V) issued A1/A+ rated high-grade bonds worth $16.0 billion via six parts. This included $1.75 billion in 1.20% two-year notes at a spread of 30 bps.

Canada is the world’s fifth-largest oil producer. It produces about 6% of global energy supplies and ranks third in the world in proven oil reserves.

Canadian Imperial Bank of Commerce (CM CN) is the fifth largest bank in Canada and boasts 11 million clients.

On October 23, Rockwell Collins (COL) announced that it intends to acquire B/E Aerospace (BEAV) for a total consideration of $8.3 billion. Within Rockwell Collins, B/E Aerospace will operate as its new Aircraft Interior Systems segment.

UBS Group Funding (Jersey), a subsidiary of UBS Group AG (UBS), issued BBB+ rated high-grade bonds worth $5.0 billion via three parts on March 29.

Investment-grade bond funds saw net inflows of $2.2 billion during the week, the highest since February 25, 2015.

Anheuser-Busch InBev (BUD) issued $46.0 billion in high-grade bonds rated A2/A- rated on January 13. This was the second largest high-grade bond issuance on record.

Investment-grade corporate bonds worth $62.47 billion were issued in the primary market in the week ended January 15, 2016. Investment-grade corporate bonds worth $29.68 billion were issued in the previous week.

Flows into investment-grade bond funds were negative for the week ended December 16. The investment-grade bond funds saw record net outflows of $5.1 billion during the week.

There was no issuance of investment-grade corporate bonds in the primary market in the week to December 18, 2015.

When the rate does rise, it will mean an increasing interest rate environment, where corporate issuers may be required to pay more interest to creditors.

Rising home prices lead to households taking on more debt to fund the purchase. Increased bank lending to fund the purchases drives real estate prices up more.

The availability of easy money leads to currency depreciation, which benefits exporters, but is counterproductive for importers.

The key interest rate and the prime rate are central to the Canadian financial system. They key interest drives lending rates at the big banks.

Canada’s inverted sovereign yield curve could be an indication of an upcoming recession. US yields exhibited similar curves prior to the 2008 recession.

One of the challenges facing the Canadian economy is a lack diversification. More than 70% of the TSX Composite Index is made up of only three sectors.