Everyone’s seen the housing bubble headlines this year. But some say there is a real bubble that’s been overlooked, and it’s been losing air fast.
The reference is to the bond market. Bonds have collapsed and yields (which lead fixed mortgage rates) have catapulted .70% higher since October 19.
On Friday, 5-year government yields made a 22-week high, closing at 2.56%. The Wall Street Journal proclaimed, in reference to US yields, this could be “the end of the bond mania.” (US and Canadian yields are tightly correlated.)
If yields move much higher, lenders will certainly lift longer-term fixed rates. A few already have. Keep that in mind if you’re planning to get a fixed rate hold soon. Fortunately, there are still excellent fixed rates to be had.
Whether yields continue higher from here is anyone’s guess. Traders say there is a bias in the market to keep selling bonds near-term, but there is also a high probability of up-and-down volatility until economic growth is more consistent.
Some of the many variables currently affecting yields (and mortgage rates) include:
• European debt risk
• US housing/mortgage instability
• Lingering US unemployment
• Canadian core inflation (some would also say commodity-driven headline inflation)
• A surging US deficit
• The BRIC’s economic performance, particularly China’s
Whatever the case, yields were unable to sustain the panic-lows they saw in October. Hence, the days of 3.39% five-year fixed rates are probably history.
On the upside, few analysts expect yields to soar and not look back. BMO stated on Friday that Canada could be “in a period of sustained exceptionally low long-term interest rates.”
Nonetheless, if North American economic growth trends higher, 5-year yields could easily pierce 3% in the next few quarters. That would bring 5-year fixed mortgages back to 4.50% or above.
www.christinejacob.com
The reference is to the bond market. Bonds have collapsed and yields (which lead fixed mortgage rates) have catapulted .70% higher since October 19.
On Friday, 5-year government yields made a 22-week high, closing at 2.56%. The Wall Street Journal proclaimed, in reference to US yields, this could be “the end of the bond mania.” (US and Canadian yields are tightly correlated.)
If yields move much higher, lenders will certainly lift longer-term fixed rates. A few already have. Keep that in mind if you’re planning to get a fixed rate hold soon. Fortunately, there are still excellent fixed rates to be had.
Whether yields continue higher from here is anyone’s guess. Traders say there is a bias in the market to keep selling bonds near-term, but there is also a high probability of up-and-down volatility until economic growth is more consistent.
Some of the many variables currently affecting yields (and mortgage rates) include:
• European debt risk
• US housing/mortgage instability
• Lingering US unemployment
• Canadian core inflation (some would also say commodity-driven headline inflation)
• A surging US deficit
• The BRIC’s economic performance, particularly China’s
Whatever the case, yields were unable to sustain the panic-lows they saw in October. Hence, the days of 3.39% five-year fixed rates are probably history.
On the upside, few analysts expect yields to soar and not look back. BMO stated on Friday that Canada could be “in a period of sustained exceptionally low long-term interest rates.”
Nonetheless, if North American economic growth trends higher, 5-year yields could easily pierce 3% in the next few quarters. That would bring 5-year fixed mortgages back to 4.50% or above.
www.christinejacob.com
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