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Forecast for Canadian Fixed and Variable Mortgage Rates in 2020

In the current context, our yield curve is inverted essentially because the Bank of Canada (BoC) and the bond market have differing views on where our economy is headed.

At its last meeting of 2019, the BoC continued to offer a relatively optimistic outlook for our growth prospects and determined that holding its policy rate steady at 1.75% was necessary in order to contain inflationary pressures. Conversely, the bond market spent 2019 bidding longer-term GoC bond yields lower, based on the belief that our economic growth will slow and that inflationary pressures will ease.

Forecast for Canadian Fixed and Variable Mortgage Rates in 2020

In the current context, our yield curve is inverted essentially because the Bank of Canada (BoC) and the bond market have differing views on where our economy is headed.

At its last meeting of 2019, the BoC continued to offer a relatively optimistic outlook for our growth prospects and determined that holding its policy rate steady at 1.75% was necessary in order to contain inflationary pressures. Conversely, the bond market spent 2019 bidding longer-term GoC bond yields lower, based on the belief that our economic growth will slow and that inflationary pressures will ease.

REIT'S

Average quarterly yields for senior unsecured REIT debt continued to decline in Q3. While yields have mostly mirrored those of of commercial mortgages this year, many REITs continue to have suppressed equity prices relative to the broader Canadian equity market. Analysts note that the industry’s lag is partially attributed to significant weightings in retail and office assets.

 

Issuances of new REIT debt declined relative to last quarter, both in terms of average issuance size and number of issuances. Since March of this year, only one outstanding issuance has been downgraded by DBRS. Interestingly, no REITS with senior unsecured notes currently outstanding have had their long-term issuer rating downgraded since the start of the pandemic

michael@finneotech.com

(647) 393 - 8884

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