Bond yields rise as fixed mortgage rates move up

Bond yields rise as fixed mortgage rates move up

Canada's five-year bond yields reached their highest level in almost a year, in part due to improved employment numbers in the U.S., BusinessWeek reported. 

"Banks are hedging seasonal mortgage flows, which is weighing on the five-year sector," Mohammed Ahmed, a rates strategist at CIBC told BusinessWeek. "Banks are receiving a fixed-rate asset and to hedge that, they typically pay the fixed rate in swaps, or sell cash bonds."

Canada's benchmark five-year bond yielded 3.04 per cent yesterday, the magazine reported, up 15 basis points from April 1 and the first time the yield has broker the three per cent mark since October 2008. The Bank of Canada will auction $3 billion worth of 1.5 per cent bonds tomorrow.

Most lenders raised five-year, fixed mortgage rates last week in anticipation of higher inflation. These rates will serve as the qualifier for borrowers when the new mortgage rules come into place on April 19. 

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