Bond yields usually rise on good economic news and today was no different. The 5-year bond yield jumped 0.14% today on strong jobs data from both sides of the border. (Canadian Jobs Report / U.S. Jobs Report)
Canada added 79,100 jobs in November. Traders had expected only 15,000.
With rebounding yields, fixed mortgage rates will probably halt their drop, at least for the time being. As of now, discounted 5-year fixed rates are just under 4%—well below the approximate 10-year average of 5.36%.
The 5-year yield, which influences fixed mortgage rates, now stands at 2.53%. It seems to be putting in a floor in the 2.35% to 2.40% range. It may be tough to penetrate that floor in the near-term without weaker economic news, or some other economic shock.
The Bank of Canada holds its last interest rate meeting of the year on Tuesday. 19 of 19 economists polled by Bloomberg predict no change to the Bank’s 0.25% overnight rate.
Nevertheless, analysts will be watching to see if the BoC surprises the bond market with any optimistic outlooks.
Just as an FYI, I have tracked bond yields on a daily basis since Feb 2009 and that is the biggest single day increase in the bond yield since then. It is also the biggest single day change since Aug 21/09, and on that date it was a decrease in the bond yield.
This is BS … bond yields dropped all the way from 2.60% to 2.36% with no budge in fixed mortgage rates.
Now that window of opportunity is gone.
Sometimes I wish Canada’s banking sector wasn’t so consolidated … if we had hundreds of banks like in the States, the competition would ensure that bond yield drops would correspond to mortgage rate drops.
I’m also very disappointed that the public, for example the visitors to this site, weren’t pressing for mortgage rate drops while bond yields were so low the past couple of weeks.
Hi David: Friday was definitely a big jump. There was a huge up-move Oct 9 as well (23 bps).
Hi Dan: We saw a lot of non-bank lenders cut their rates since the big 5’s reduction on Nov. 18. In other words, the best rates (when looking at all lenders) did come down.
As for the banks themselves, they chose to increase branch discretion instead of lowering posted rates. They often do that for various internal reasons.
Cheers,
Rob