Foreign and domestic investors alike have been lining up to buy Canada Mortgage Bonds (CMBs). In the last 12 months, the volume of mortgages funded by CMBs has risen 20%, according to CIBC’s Doug Bartlett.
It’s also noteworthy that investors are no longer demanding abnormally wide yield premiums over 100% safe Government of Canada bonds.
At the last Canada Housing Trust variable-rate auction, for example, demand was twice as large as expected. $2.4 billion worth of mortgage-backed debt was sold at a meagre 0.18% surcharge over low-risk bankers’ acceptances (BAs).
Even the private sector is having success selling mortgage investments. Last week, Equitable Groupissued $45 million of non-voting stock for $25 a share. That’s rather impressive for a small non-prime mortgage lender in a recovering mortgage market.