The very first 10-year Canada Mortgage Bonds (CMBs) launched last Thursday. As expected, investors ate them right up.
$2 billion worth of the 10-year notes were sold at a 4.11% yield. That’s 0.73% above comparable government bonds.
Like regular 10-year Canadas, CMBs are also fully guaranteed by the Canadian government. Their 0.73% premium over regular bonds is therefore one of the closest things to free money you’ll get in a government-backed bond.
This newest issuance continues to support Canada’s lending market. While CMBs have been in existence since 2001, in the last year or so they’ve become an increasingly vital source of mortgage capital. That’s because fear of mortgage defaults has chased many traditional mortgage investors into hiding. The CMB program picks up some slack and provides sustaining capital to lenders who might otherwise have few other sources of funds.
The new 10-year CMBs join Canada Housing Trust’s existing 5-year and variable-rate issues. Going forward, 10-year CMBs will likely be sold on a quarterly basis according to CMHC.
As 10-year CMBs attract a broader pool of investors, they will continue to provide much-needed capital to the mortgage market. That, of course, has a positive effect on interest rates for Canadian homeowners.
Last modified: April 29, 2014
Where does the average investor find this product to purchase?
Hi Sam,
Most big brokers (TD, ETrade, etc.) can facilitate the trade for you. CMBs are sold in $1000 increments.
Cheers,
Rob
Amusing to see our right-wing free-market government bailing out the innovative, courageous, risk-taking financial sector yet again. And these were the same guys who told poor people to seek out dented cans of tuna in order to save money.
I think it’s time to nationalize the entire sector under the democratic control of financial-sector workers and consumers. We can’t afford private-sector profiteering and waste any longer.
Good day.