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Massive Decline in Bond Yields

Bond-yieldsCanada’s 5-year bond yield had a huge drop today—it’s largest 1-day fall since September.

The yield on the 5-year Canada now stands at 1.70%, a 2-month low.

The unusual move came after the U.S. Fed announced it would buy over $1 trillion of fixed-income securities in the open market.  Analysts say that is tantamount to the Fed admitting there is no bottom in sight for the American economy.  (More on this at CEP)

Bond traders–who put their money where their mouth is when predicting rates–never saw this coming.

Many were caught short and had to cover in panic fashion.  Yields dropped like a rock as a result.

This, of course, is great news for people on the hunt for a good fixed mortgage rate.  (Bond yields generally lead fixed rates.)  So far we’ve heard of two lenders talk of lowering their rates.  We’ll have to wait and see what happens over the next 3-4 days.