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TagBond yields

Canadian$ at par with U.S.$….Bonds over 3.00% first time since Oct. 2008

Canadian $ at par with the U.S. $

Today, the Canadian $ hit 100.12 cents briefly this morning…. A clear signal that the rest of the world is viewing Canada as having a very stable and solid economy…. Here’s an article with forecasts of the dollar remaining at these levels into next year….

But if the Canadian $ remains at these high levels, it puts pressure on the Bank of Canada not to raise the Bank rate as high or as quickly…. Any increase in the Bank rate will drive the Canadian $ higher…

5 Year Bond yields over 3.00%

The 5 year Canadian Bond yields jumped to over 3.00% for the first time since October 2008… That’s the same time the U.S. Sub-Prime mortgage crisis hit and the world fell into a recession.   Bond yields affect fixed rates…..current 5 year fixed rates are hovering between 4.19% and 4.39%… today’s Banks and Mortgage Lenders are looking for a 1.20% to 1.30% spread and we are that level… Further increases in the Bond yield will cause fixed rates to go up….

Expect fixed rate increase of 20bp to 30bps as 5 yr Bonds up to 2.70%

Fixed rates could increase as the 5 year Bond yield jumped to 2.70%….this is up 21bps from a week ago… The spread now is 1.19% between 5 yr fixed rate and the 5 yr Bond… normally, lenders want to see a 1.35% spread …. if the Bond market continues to stay at this level or increases further, we will see fixed rates rise.

The U.S. employment stats also came out today…..unemployment held steady at 9.7% which is better than analysts expected… This will also put pressure on the Bond Market… Canadian employment figures come out next week…

Remember, fixed rates has historically increased sooner than the Bank prime rate which affects Variable rate….. This could be the beginning of the slow but steady rise in rates…. It’s certainly not time to panic but we should pay attention…