Canadians have seen mortgage interest costs climb sharply, and they’re going to need to get used to it. The Government of Canada (GoC) 5-year bond yield opened at a multi-year high on Friday, hitting levels last seen in 2007. It’s not the only bond yield popping higher, and that means mortgage borrowers should brace for even higher costs. Those hoping for relief may be disappointed, as global yields climb and economists see borrowing rates heading “higher for longer.”
Canadian Government Bond Yields Are Ripping Higher
The GoC 5-year bond continues to rise to highs no one thought possible just a few years ago. It opened with the yield at 4.26% on Friday morning, moving 17.14 basis points (bps) higher over the past five days. This has more than reversed the ground lost around a month ago, when expectations briefly softened.
Yields Are Going “Higher For Longer,” and Mortgages Will Follow
Initially, the market generally saw higher yields as a temporary issue. However, inflation is proving to be more stubborn and global liquidity is shifting. Originally thought to be temporary, a rise in global yields indicates low yields after the Global Financial Crisis may have been the temporary trend.
Canada isn’t immune to this global bond yield shift. “The drumbeat of higher for longer is spilling into long-term Canadian yields,” wrote Douglas Porter, chief economist at BMO.
Article courtesy of BetterDwelling
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