Bond yields falling?!
Rates to follow?
After all this talk of rates climbing quickly, there is now a buzz that rates could drop?! We all know that fixed rates are tied directly to bond yields and now Canada's 5 year bond yields are down from the June 10 high of 2.81% to 2.43% yet there has been no significant drop in the 5 year fixed rate (the largest drop we have seen in a non bank lender who dropped 0.10% - peanuts).
So if fixed rates are connected to bond yields, and bond yields are down then why are fixed rates not decreasing? It could very well be that right now banks are overly concerned with profitability because they only have 4 months left to hit their yearend targets. Bond yields fluctuate so many banks and lenders are most likely waiting to be sure bond yields stay consistent before they attempt to make any moves.
As you can see, fixed rates are definitely influenced by bond yields, but the banks and lenders have the final say.
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