First National Financial LP

Market Commentary: A look at this week’s yields

  • Thomas Kim, Vice President and Managing Director, Capital Markets
  7/8/2021  6/30/2021   5/31/2021 4/30/2021 
 5Y GOC   0.90  0.98  0.91  0.93
 10Y GOC  1.27  1.39  1.49  1.55
 10Y-5Y  0.37  0.41  0.58  0.61

Yields were sharply lower over the last few days, with the yield curve continuing the recent trend towards being flatter. Looking at the difference between the 10-year and 5-year GOC yields, the curve is 37 bps now vs 63 bps in mid-May. The 5-year has only so much room to flex with the market anticipating some future path towards a less accommodative Bank of Canada – someday. So, much of this flattening is 10-year yields trending lower since the end of April (down 28 bps). 

There are at least two narratives to consider. One story is the market revising its view on just how strong the economic recovery will be with the backdrop of vaccine hesitancy in the U.S. and variants of concern spreading around the world. Another story is that lots of market participants have been betting on higher rates and a steeper yield curve and this is just a normal reversal after moving too far too fast.

Big moves in the market can be stressful but they can also be times of opportunity. A First National mortgage expert can help you evaluate what a flatter yield curve means for your next mortgage deal.