The Bank of Canada’s estimated term premium demanded by investors has been on a steady grind higher since 2020, reaching 15-year highs…

… on the surge in new debt issuance.

While broader economic challenges (unemployment, housing, trade, etc.) have kept a partial lid on the long end, sticky inflation is raising the odds of rate hikes in the near term…

… which should put upward pressure on government interest expense and in turn, the federal debt service ratio. With the PBO expecting the ratio to hit 13% by 2030, it might not be long before we break the “David Dodge Rule”…

… and corporates should feel it too, given higher benchmark yields impact variable rate debt and create refinancing pressure on near-term maturities.

Companies with large floating rate exposure like Pet Valu (PET) would feel it most, which could prompt a wave of hedging activity at the rate desks of the Big-6 banks…

… who also benefit from higher mortgage rates on renewal (if credit quality holds), which move in tandem with government 5-year yields.

On the consumer side, higher mortgage costs should eat into budgets…

… which investors have been pricing in, with the consumer discretionary basket down big despite objectively good prints from names like Aritzia and Groupe Dynamite.

VersaBank (VBNK) announced a partnership with Fiserv to support the Bank of North Dakota’s stablecoin, which should have limited financial impact relative to the bank’s US growth…

… but could be the start of an important relationship, given it’s the first live use case on Fiserv’s digital asset platform. Should stablecoins and tokenized deposits get broader adoption, it would represent a new low cost funding source…

… driving VersaBank’s net interest margins higher over time. Still early days, but the company is laying the groundwork for the future - building on its Stablecorp deal announced in February.

Firan Technology (FTG) was up another 8% Friday as investors position for earnings this week, which should bring continued growth in aerospace…

… underpinned by huge production outlooks from Boeing/Airbus and defense program wins. Together, these dynamics have driven steady order book growth…

… which should translate to margin expansion as it converts into revenue, given the operating leverage inherent in FTG’s business model.

Investors are pricing that in, with the stock trading at its peak valuation - opening the door for equity-funded M&A to support management’s growth ambitions.

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