Interest Rate Trends

Recent interest rate news nuggets…

• Core inflation jumped surprisingly last month to 2.4%.  That’s tempered rate-cut expectations, at least somewhat. (Globe & Mail)
• Credit market traders are still pricing in a 100% chance of a 1/2% rate cut by the BoC’s January 20 meeting. (CEP)
• TD chief economist Don Drummond agrees:  "I think the next meeting of the Bank of Canada will cut another 50-basis points."  (CTV)
• Desjardins says:  "In Canada, key interest rates should end their descent at 0.75 % in January 2009." (That’s 3/4% lower than where they are now.)
• The fun won’t last forever.  CIBC economist Benjamin Tal sees a 1.00% to 1.20% increase in rates following the economy's recovery late next year. (CMP)
• “A modest recovery should begin in the second half of the year.” – BMO economist Doug Porter
• "If you want to know where mortgage rates are heading, watch the yields on government of Canada bonds. That's what mortgage brokers do." - Former CIBC Mortgage CEO, Brendan Calder
• Despite the massive drop in yields, there’s been no bounce. The 5-year Canada bond yield, upon which 5-year fixed rates are based, is still just 1.82%. CIBC says “there’s room to drag bond yields a bit lower still.”
• AMA Financial says "prime plus" is for sissies. They're the only Canadian lender advertising prime minus variables (prime – 0.30% to be exact). The main catch: you have to live in Alberta. How do they do it when most lenders are at prime + .60% or more?  They apparently have money to lend from their balance sheet.  Perhaps they're also hoping variable-rate customers later lock into AMA’s above-market fixed rates.

Comments

[QBeck]

Just want to say that you provide excellent summaries of future interest rate expectations. These posts help a great deal. Thank you..

[TopHomeMortgageLoan]

Everyone tends to expect the market to recover by late next year, but what will the banks do if it doesn't?