Don’t Get Excited By Rising Yields, Suggests Carney
Canada’s head banker, Mark Carney, says bond traders have “lost their focus” by running up bond yields.
He told Reuters: “We don’t see, for example, corporate investment really picking up until 2011…2010 is still going to be a year where policy really matters.”
Translation: Don’t bet on prime rate rising before the end of June 2010 (assuming inflation remains under 3%). Carney believes our economy still needs low rates.
That, of course, is reassuring news for variable-rate mortgage holders. It’s not so reassuring, however, for people who feel housing prices are getting a bit frothy. (There seems to be a lot of press about Canada’s growing housing “bubble” lately. We’ll touch on that in a separate article.)
As for the 5-year bond yield, which drives fixed mortgage rates, it’s up four basis points today to 2.78%. (That’s not too far from the one-year high of 2.91%.)
For now, we’ll be awaiting next Thursday’s industrial price index reports, next Friday’s GDP report, as well as the big October employment report on Nov. 6. Central One Credit Union economist, David Hobden, feels October’s employment figures will be something to keep an eye on. He says, “Employment is best measure of real economic output.”