That’s significant because, like government of Canada (GoC) bonds, CMBs are supposed to be backed by the government and risk-free.
Things are much better now. Investors are no longer jittery about Canada’s real estate and credit markets like they were 11-12 months ago. In turn, CMB spreads have shrunk back to a 21-basis point GoC premium (much more normal).
That, of course, is welcome news to the mortgage market. Not only are smaller CMB-bond spreads a sign of recovery, but they usually signify improving mortgage rates—particularly with non-deposit-taking lenders who rely heavily on the CMB for funding.