EUROZONE T-BILL ISSUANCE: W/C 19 May

Asked how close the call was to hold vs cut today, Gov Macklem says that the BOC considered a 25bp cut but ultimately decided to hold off until receiving more information. Senior Deputy Gov Rogers says "After some really good deliberation and taking in everybody's views, there was there was a real clear consensus on on a hold being the right decision".

• Rogers says that recent market volatility didn't suggest "dysfunction" in the Canadian financial system, though the BOC will be watching for signs that short-term volatility is starting to affect stability:  "I think the initial moves in the in the financial markets were pretty drastic, pretty violent. Things have settled a bit since then. We didn't.... see dysfunction in the market. So the market seemed to absorb what was a pretty big shift without big dislocations. Liquidity was a bit constrained for a while. Spreads widened. We saw what you would expect to see when you see the kind of abrupt policy shift happen, and the markets tried to absorb it in a short amount of time. We are watching closely.... we'll definitely be watching for for signs that that the short term volatility is starting to to affect stability. We've got our financial stability report out in little over a month, so we'll have more to say then."
• On the unusual decision to provide scenarios in the MPR rather than a central forecast, Gov Macklem says that providing precise forecasts would be a disservice to Canadians. "We don't think of either of the scenarios as a projection or forecast. Right when, when we sat down to deliberate, normally, we have a projection. And because we didn't, we didn't. We created these scenarios just to try to illustrate how we thought this was going to play out. But I'd want to just be careful not to use that word, right? They're illustrative scenarios. "

The NAHB/Wells Fargo Housing Market Index was slightly stronger than expected in April but didn’t materially alter an outlook that suggests the current rebound in residential construction is likely to be subdued. 

• The housing market index ticked up to 40 (cons 38) in April after 39 in March, seeing some stabilization for a third month running at the lower end of a 39-51 range seen since early 2024.
• There were mixed drivers for April specifically: the heavily weighted present sales category increased for the first time since Jan (+2 to 45) whilst there was a small increase for prospective buyer traffic after two sizeable deadlines (+1 to 25) but six-month ahead sales expectations dropped further to 43 (-4) for the lowest since Nov 2023.
• Similar pace of home price declines: “The latest HMI survey also revealed that 29% of builders cut home prices in April, unchanged from March. Meanwhile, the average price reduction was 5% in April, the same rate as the previous month. The use of sales incentives was 61% in April, up from 59% in March.”
• Homebuilder sentiment remains more bearish on a relative historical basis than the price to book ratio of S&P 500 homebuilders although the latter has seen a significant correction since the US election. 

• US TSY 17W AUCTION: NON-COMP BIDS $708 MLN FROM $60.000 BLN TOTAL