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5-year Yield Dives Past All-time Closing Low

Rate-dropCanada’s 5-year government yield (which guides fixed mortgage rates) has tumbled a remarkable 27 basis points. That’s the most since the September 15, 2008 Lehman Brother’s bankruptcy.

Canada bonds (whose prices move inversely to yields) are gaining on a flight to quality and a feared North American economic downturn.

Even U.S. Treasuries are being panic-bought, the very securities that were downgraded by S&P.

If yields were to stay at these levels (that’s far from guaranteed), widely available 5-year fixed mortgage rates could drop to below 3% for the first time in history.

So far, the major banks have delayed cutting posted 5-year fixed rates since the 5-year yield was at 2.18%—a whopping 65 basis points higher than today. In normal markets, a 20+ basis point move is generally enough to move posted rates.

Rob McLister, CMT