On a positive note, global investors are now finding Canadian treasuries far more appetizing—due in part to Canada’s AAA debt rating, budgetary prudence, and stable currency. That has sparked a money rotation into Canada, adding to today’s bond buying. (When investors bid up Canadian government bonds, our yields drop.)
With the American debt Band-Aid in place and yields crashing, lenders should now be ready to drop posted fixed mortgage rates (barring unforeseen events).
Today we’ve already seen:
A major bank lower discounted fixed broker rates by 10 bps to 3.69%
A few non-bank lenders cut 5-year fixed rates by 10 bps
Variable-rate mortgagors should also benefit from all of this (mortgage-wise, if not economically). That’s because a BoC rate hike appears to be off the table in 2011…if you believe what Overnight Index Swaps (OIS) and BAX futures are implying. If true, prime rate will stay put for at least the short-to-medium term.