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Canada's closely-watched 5-year bond yield is suddenly 38 bps higher year-to-date. That's
Predicting lower rates has become a national pastime. With millions of mortgage shoppers becoming armchair forecasters, rate-cut expectations have led to a higher-than-normal share of Canadians considering short-term mortgages.
Yet, for months, such borrowers have been frustrated by the fact that longer-term rates (e.g., 5-year terms) have fallen much
Two-year bond traders are going all-in on rate-cut bets. Exhibit A is the following chart. It shows Canada's 2-year yield, a leading indicator for BoC rates. It just made an 8-month low on Friday after failing to rebound above its 18-month average.
To some, technical analysis might seem
In the last three months of 2023, the 4-year swap rate—a leading indicator of fixed mortgage pricing—plunged 125 bps. The descent trimmed down fixed rates by about 60 bps.
For the average Joe/Josephine getting a new $300,000 mortgage, that means a cool $8,700 that they
⏩The short of it: In 2024, the BoC should loosen its grip and give rates a snip. The market's magic 8-ball now shows 5-6 target rate cuts in 2024. Until that seems imminent, the BoC will keep playing hardball—trying to deter premature rate celebrations and home-buying exuberance.
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