Bond Yields Descend

Canadian government bond yields have dropped back through their 5-month trading range.  If you’re a market technician, this kind of activity typically hints to ongoing short-term weakness.

5-Year-Bond-YieldsThis weakness in yields is being driven, in part, by Mark Carney’s dovish comments yesterday. The BoC Governor suggested Q3 GDP will fall short of its 2% growth estimate.

Yields are also being weighed down by the loonie’s selloff and a slew of dull economic reports recently.

On the supply side, the stream of new bond issuances has been non-stop—but this supply is not boosting yields.  Investment firm, Odlum Brown, says: “The Canadian bond market is absorbing new issue after new issue with no shortage of buyers.”

Here’s the recent effect on key bond yields:

Bond yields affect fixed rates because they influence lenders’ cost of funds for fixed rate mortgages.  Many mortgage lenders have already cut their rates as a result. 1-year fixed rates are now commonly being quoted below 2.50% through mortgage planners. 5-year fixed rates are below 4%.

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