Bond yields jumped

Bond yields jumped yesterday, basically 15 bps up from where they were trading the last week or so. If this yield increase holds, or continues this trend we will have higher rates soon.

Do not be surprised if 5 year rates are up again, soon.  Five years ranging from 3.25 to 3.5% would not be unusual considering the five year bond is now 1.64.  This is a full point higher than it was two months ago. Rates were 2.49 to 2.79 kind of, with all the different offerings when the bond was .6 to .8%.  Banks the last few years have been pricing in a spread of 2% or 200 bps over the 5 year bond.  Banks are getting used to big profits so expect the spread to remain close to 175 to 200 bps.

Bond yields can retreat but bond traders usually follow the herd longer than one month.

Most talking heads are predicting the Bank of Canada will go up another quarter in one of the next two meetings.

Of course, if Toronto house prices really do collapse, drop by 25 to 30% in the next few months, prices not activity, then all this could change. Much of the governments’ actions are about Toronto. Many other factors can influence all this as well.



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