Bond Market Waiting for Jobs Reports

Bond-traders-WaitingTraders are treading cautiously ahead of Friday’s big U.S. and Canadian jobs reports.

Bond yields are hovering just under their 15-month high.

Most lenders are holding off on further mortgage rate increases ahead of the report.

Interestingly, only a few lenders chose to raise mortgage rates following December’s big spike in yields. (Why spoil the holidays, eh?)

Looking forward, this Friday’s employment report could be a huge catalyst for rate direction.  It should be:

  • Positive for mortgage rates if employment gains are dismal; or
  • Negative for mortgage rates if job gains are strong.

Mortgage planners will probably want to have their rate locks ready in case yields happen to explode higher.

Canadian and U.S. employment reports will be released Friday, January 8, at 7:00 a.m. and 8:30 a.m. ET respectively.

  1. I have watched Australia lately when they increased their rates down there recently. One of their big banks, Westpac went out on a limb and increased their rate to 0.47 points vs the 0.25 increase the Aus central bank increase. What are the chances that the big banks in Canada would do this once rates start to go up? I recall when rates were dropping last year or two, there was a incident where when a 0.50 drop occurred one of the big Canadian banks only passed on 0.25.

  2. How is the Australian housing market doing since the rate increase? Have any good sources or blogs that could help inform someone like me who hasn’t kept up at all?

  3. all this hype about rates about to increase is just nuts. Look at the jobs numbers – both US and Canada are losing jobs still. Bond yields are likely close to peaking again and will in all likelihood trend downards again from here. There is no recovery in the economy likely for many many months, if not years, so rates will stay low for much longer than everyone is predicting. I dont see any rate increases in Q3 of this year as so many people are predicting. Things are just too darn weak for that to happen. Until there is some solid sign of a recovery underway, low rates will persist and we may in fact see NEW record low rates in the next 6 months as everyone wakes up to the fact that we’re pretty much in a Depression, which typically lasts many years.

  4. I don’t agree with Al that this is a depression; however, I do not feel that we are fully out of this recession yet. I do agree that too many people are getting ahead of themselves. 2010 should be a decent year, economically, in the end.

  5. Canadian bonds are not rallying much on these disappointing jobs figures. They are down only 4 bps. That should tell people something. There is latent weakness in the bond market.
    When the 5 year bond breaks 3% the trend in rates will probably be up, not down. Expect a lot of volatility in the meantime.

  6. Two things:
    1) Employment is a *lagging* indicator of economic strength, and this report was not all that bad. Quoting TD, “even with this minor setback, the Canadian economy created 38,000 jobs in the final quarter of 2009 – remarkable given the early stage in
    the recovery game.”
    2) The BoC targets inflation, not economic growth, per se.
    Any talk of Canada being in a “depression” at this point is pure hyperbole, especially since the last available GDP figures from StatsCan show GROWTH.
    Al R

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