At last glance, 5-year bond rates were at 3.04%! That’s the lowest they’ve been since 1997 (the furthest back the Bank of Canada’s online database goes).
We’d be lying if we didn’t admit our surprise that bond traders consider Canada’s economic outlook so dire.
As for the bonds’ effect on mortgage rates, the fixed-5-year spread is now absolutely ENORMOUS at 4.23%. Historically it’s been around 2.50%. If this spread doesn’t narrow materially in the next week or two it’ll be amazing.
Discounted 5-year fixed rates should theoretically be about 4.14% right now, based on historical relationships. Instead they’re averaging about 5.79%!
Lenders have been slowly cutting their fixed rates in the last week or so, but the reductions are peanuts in relation to Canada’s falling bonds yields.
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