Benign inflation (1.8% versus the BoC’s 2% target)
European credit default risk
Weak Canadian retail sales
Investors’ appetite for risk-free assets (govt. bonds)
Yet, despite all the above, fixed-income traders were still pricing in a 73% chance of a 25 basis point rate hike on July 20 (as of yesterday). If they’re right, that would lift prime rate (and variable mortgage rates) accordingly.
Fixed mortgage rates will continue to be guided by bond market. Currently, the 5-year yield is riding just above major long-term support in the 2.40% area. Most expect it to bounce off these levels but, as always, one never knows what news tomorrow will bring.