Canada’s 5-year bond soared on Monday.  In turn, its yield plummeted a stunning 27 basis points (0.27%).  Bonds yields haven’t had a one-day plunge that big in over 10 years (as far back as the Bank of Canada has public data).

The powerful move was prompted, of course, by the Lehman bankruptcy in the U.S., Merrill Lynch’s surprise takeover (savior), and AIG’s enormous liquidity crisis.  Traders ran for cover in the safest securities available, Canadian and U.S. treasuries.

BMO economist Sherry Cooper says this financial crisis is “the worst” she’s ever seen.  It will therefore be interesting to see how things play out in Canada’s mortgage market this week.  Usually, big dips in bond yields are good for mortgage rates, but we’ll have to wait and see where all the dust settles.

Data source: Bank of Canada