Categories for Economic Analysis

Rate Nuggets: Yields Slow the Descent in Fixed Rates

Bond yields have found at least a near-term bottom after four-and-a-half months of declines. That means Canadian fixed mortgage rates may also have found a bottom…for now. Here’s a quick look at the lowest effective 5-year fixed rates, and how far they’ve fallen since the peak last fall: Insured: 2.79% -44 bps Insurable (80% LTV or less): 2.93% -40 bps Uninsured:...

Canada’s Inverted Yield Curve. What Happens to Mortgage Rates Now?

The Canadian yield curve has officially inverted and that’s bearish for mortgage rates. An “inverted yield curve” (in this context) means that the interest rate on almost every Canadian government bond is now below the Bank of Canada’s 1.75% overnight rate. That’s pretty rare. Why it Matters Inverted yield curves are a danger sign. In a normal economy investors like...

Rates Slip Further

Canadian interest rates are still sliding. On Monday, Canada’s 5-year bond yield—which drives fixed mortgage rates—closed in the 1.50% range, something it hasn’t done since November 2017. Dozens of lenders have trimmed fixed rates in recent days as yields keep tumbling. And big banks are not excepted. With skidding home sales, weakening property values and mortgage growth near multi-decade lows, the...

Mortgage Rates Under 3% Shine…If Neutral is 2%

BMO Capital Markets has taken a “scalpel to [its] Canadian rate forecast,” as it describes it. The company now projects just one Bank of Canada rate increase in all of 2019. By comparison, financial traders peg the odds of a rate hike this year at just 49%. That’s according to implied probabilities in the bond market, as tracked by Reuters. BMO is...

Canada Will See Higher Rates Before Lower Rates: Scotia

The talk of the market this month is how traders are pricing in a decelerating economy and lower interest rates — to which Scotiabank Economics replies, think again. December’s selloffs in oil and equities and incessant chatter about yield curve inversion got many thinking we’re headed towards a rate cut by 2020. But in a recent report, Scotia challenged that...

Rate Hikes With This Growth? For Real?

The Bank of Canada maintains that rates are going higher. Meanwhile, it just slashed Canada’s 2019 growth forecast by a not-so-paltry 0.40 percentage points. Does that strike anyone as a mite bit inconsistent? The Bank is now calling for just a 1.7% GDP gain this year. That’s pretty darned feeble. Bonsai trees and glaciers grow faster than 1.7% a year....

Oops – Bonds – Did – It – Again

Recessionary warnings from Apple and China, weak U.S. manufacturing data and a plunging stock market accelerated the market rate collapse today. Canada’s 5-year bond yield almost touched 1.75%, where it hasn’t been since 2017. The last time yields fell this fast was March 2015, while the Bank of Canada was in the midst of cutting rates. This is not your...

Watch the Bouncing Consumer Debt Ball

Canada’s debt situation appears to be getting better…if you just look at mortgages. But something sinister lurks beneath the surface. And it’s made of plastic. Indebtedness has been outgrowing incomes in this country, despite stringent new mortgage restrictions. Canadians now owe $1.78 in credit market debt for every dollar of household disposable income, just under the record high. And we keep...

Crashing Oil Could Affect Your Mortgage Rate

Significant rate catalysts often come out of left field. Case in point: collapsing Canadian oil prices. Check out this chart below. It shows Canadian oil (a.k.a., Western Canada select, or “WCS“) rapidly cheapening versus higher-demand “WTI” oil from the U.S. This is a record discount. Its thickness, inferior quality and delivery challenges mean Canadian oil always trades at a discount to...

The NAFTA Rate Rally is On

The wait for good news on trade is over. The U.S. and Canada reached a last-minute deal on Sunday to replace the current North American Free Trade Agreement (NAFTA). And we’re seeing the rate effects already. Canada’s 5-year bond yield, which steers fixed mortgage rates, has rallied to a fresh seven-and-a-half-year high. The new deal, called the United States-Mexico-Canada Agreement (USMCA),...