03/22/2023
Today US Fed increased their rates by .25% and here is the impact is having on Canadian bond yields.
When bond yields in Canada are dropping, it generally means that fixed mortgage rates are likely to decrease as well.
This is because fixed mortgage rates are often closely tied to the yields on government bonds, particularly the 5-year Government of Canada bond.
Mortgage lenders obtain funds to lend to borrowers by either borrowing from other financial institutions or by issuing bonds.
When the yields on bonds decrease, it becomes less expensive for lenders to borrow money, and they can then pass on those savings to borrowers in the form of lower fixed mortgage rates.
As a result, when bond yields are dropping, borrowers can potentially secure fixed-rate mortgages at more attractive interest rates. This can encourage more borrowing activity and stimulate the housing market.
However, it is essential to note that other factors, such as the overall economic environment, lender competition, and the Bank of Canada’s overnight rate, also play a role in determining mortgage rates.
Thus, a drop in bond yields does not guarantee a decrease in fixed mortgage rates, but it is an influential factor that can contribute to lower rates.
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