As you can see in the chart, since the beginning of June we have seen the Canadian Bond Yields on an upward swing to the tune of around 20 basis points. By now virtually every bank/lender have increased their 5 year fixed rates by at least 10bps. If the upward trend continues in the days to come we will see fixed rates continue to move with the bond yields.

Why are Bond Yields Increasing?

A couple main factors: Improved credit outlook for the US and some solid reports out of canada.

  • The S&P has upgraded the US’s credit outlook to stable from negative.
  • The report from the Canadian housing sector showed housing starts at 200,200 at an annual rate in May. This number is well ahead of what economists were predicting at 178,100. The multi family segment being the key driver up 22.2%.

Fixed Rate Pressure

To give this all some perspective on how this all impacts where fixed rates are today. 5 year fixed mortgage rates are still around 2.99% today. The last time that the bond yields were at today’s levels was just over a year ago (April 2012) and the 5 year fixed rate then was 3.49%.