Vulnerability of indebted households to hit ‘historic’ levels as rates rise: PBO + MORE Jun 21st

Chancellor Angela Merkel vowed Tuesday to seek a broad agreement on trade at next month’s Group of 20 summit and told German business leaders that she won’t give up on a free-trade deal between Europe and the U.S.
Merkel will host leaders of the G-20 powers in Hamburg on July 7-8 amid widespread concern over the Trump administration’s “America first” approach to trade. In a speech to an annual German industry congress, she stressed the need to convince others of the advantages of open markets and free and fair world trade.
“We will do everything to achieve as broad an agreement as possible on this in Hamburg,” Merkel said. “In view of the new American administration that isn’t easy, but we must make the effort nonetheless.”
President Donald Trump has pulled the U.S. out of a trade agreement with Pacific nations. Prospects for a planned U.S.-European Union deal, the planned Trans-Atlantic Trade and Investment Partnership, also look poor…

Short position highlights are provided by TSX Datalinx.

Oil and gas stocks weighed heavily on Canada’s main stock index as sliding crude prices hit a seven-month low amid concerns about market oversupply.

The expected, gradual rise of interest rates over the next few years is poised to push the financial vulnerability of indebted Canadian households well above levels seen over the last three decades, warns a new analysis.
A report released Tuesday by the parliamentary budget officer predicted households that have been amassing debt will be left exposed to economic shocks at “levels beyond historical experience” when Canada’s low-rate era finally winds down.
The study comes amid concerns that rising debt _ largely fuelled by surging housing prices _ has already made households increasingly vulnerable to events like job losses triggered by a severe recession or a higher-than-expected jump in interest rates.
The rising rates threaten to make it harder for Canadians to pay down their debt because they will no longer enjoy an offset from the rock-bottom borrowing costs, the PBO said.
The country’s debt service ratio _ the household debt payments relative to disposable income _ has already climbed above the historical average seen between 1990 and 2017, said Mostafa Askari, the assistant parliamentary budget officer…

Home Capital Group is selling $1.2 billion in mortgage assets to real estate-focused private equity firm KingSett Capital as it looks to stabilize its position following a flood of customer withdrawals from their savings accounts.
The deal will allow Home Capital (TSX:HCG) to reduce its debt, after taking on an emergency $2-billion line of credit with onerous terms from the Healthcare of Ontario Pension Plan.
The alternative mortgage lender says it expects to lose approximately $15 million on the transaction.
Home Capital says KingSett will buy the portfolio for 99.61 per cent of its outstanding principal value, less a share of future credit losses.
The company will initially receive 97 per cent of the outstanding principal value of the mortgages. The remainder will be subject to any credit losses in the portfolio.
“This transaction will help the company further stabilize its liquidity position and highlights the flexibility and options created by the quality of our assets,” Bonita Then, Home Capital’s interim president and CEO, said in a statement…