Categories for Economic Analysis

Rates Lift Off on Trade Truce Hopes

Bond yields erupted Friday for the biggest two-day gain since 2011. Canada’s 5-year yield—which is closely watched for its influence on fixed mortgage rates—closed at its highest point since July. This comes after the Trumpinator heralded a potential U.S./China trade truce. The trade war, now a year and a half old, has pounded mortgage rates on the assumption that weaker...

RateWatch: Bond Yields Going Vertical

Some people think we’re in a bond market bubble. If that’s true, and we’re not declaring it is, the last four days are kinda what you get when a bubble pops. Bond investors are in a momentary state of panic. Canada’s bellwether 5-year government yield has catapulted 31 basis points in just four trading days. The last time that happened...

Trade Tantrums. Keeping a Lid on Mortgage Rates

Just when you think it’s safe to go back in the water, just when you think rates might be putting in some kind of floor, the bottom falls out again. Canada’s 5-year government yield did a 180 on Friday. After shooting higher earlier, it plunged 11 bps to end the week. It falls that much only about 1 in 100...

Negative Mortgage Rates in Canada

I had a chat with BNN Bloomberg’s Greg Bonnell Monday about “sub-zero mortgage rates.” A dozen years ago, uttering those words might have branded you a radical. Some would have questioned your credibility had you even proposed the thought of banks paying borrowers instead of collecting interest from them. And now with global yields at 120-year lows, it’s happening. Negative mortgage...

The Mortgage Risk of Resurrecting Inflation (+ Rate Nuggets)

In 18 days the Fed is expected to do what it’s virtually never done: inflate the U.S. economy with a rate cut — despite 50-year lows in unemployment and record highs in stocks. Some argue the Fed is dangerously veering off its normal course, that Trump’s browbeating of Powell is working. The risk is clear: more inflation. And inflation is...

Trump vs. Xi. Let’s Get Ready to Rumble

Not much going on this weekend. Only a little meeting between the world’s two most powerful leaders about 2019’s single most important economic issue. U.S. prez Trump and Chinese supreme head communist guy, Xi, collide over trade ahead of Saturday’s G-20 summit in Japan. And, batten down the hatches, because it has the potential to be a short-term tide changer...

A Falling Neutral Rate Implies Limited Variable Rate Risk

It’s remarkable how much people focus on the Bank of Canada’s “neutral rate” nowadays. It has become a lighthouse in the rate fog. People rely on it to gauge how far we are from “normal” interest rates. If you’re not familiar with the “neutral rate,” it’s basically the theoretical overnight rate that neither accelerates nor slows the economy and inflation. Last...

Could a U.S.-China Trade Pact Send Mortgage Rates Higher?

You’ve probably seen the U.S. and China wrangling over trade in the news lately. Hanging in the balance is a major trade agreement—if they settle their differences (and they eventually will). Such an agreement would be historic. It would finally end their trade war while chipping away at America’s $419+ billion trade deficit (on goods) with China. A deal could...

Fixed and Variable Rates are Closest Since 2016

The gap between the best 5-year fixed rates and best variable rates is the smallest its been in two and a half years. We’re talking less than 1/8th of a percentage point between them. Depending on the equity a borrower has, folks can even find 5-year fixed rates that are below the best variable rates. What’s Provoking It One reason...

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:...