But the breezy days of March (and a series of hawkish economic reports) appear to have changed expectations.
The Governor of the Bank of Canada spoke one word this week and market's stirred.
Carney went out of his way to remind Canadians that the promise of low rates is “expressly conditional” on low inflation. And inflation has been stronger than expected.
But it was the addition of that one adverb in a 3,131-word speech (prior to this low rates were merely 'conditional' on low inflation) that had the power to jolt financial markets.
And jolt they did.
Banker’s acceptance yields (which drives variable mortgage rates) hit a new 10-month high. 1-year bond rates are at a 13-month high. And Bloomberg says Canada’s 6-month overnight index swap rate, a gauge of what the overnight rate will average over that period, is at a one-year high.
Also up is the 5-year bond yield, which influences fixed mortgage rates. It made a new 5-month high this week.
Note the comments of economists now:
- "It increasingly seems as though the Bank of Canada is very tempted toward a June hike." - Eric Lascelles, chief rates strategist at TD Securities.
- “I cannot imagine a lower inflation forecast being unveiled come April, but can easily see a higher and sooner forecast.” - Derek Holt, economist at Scotia Capital. Holt thinks Carney may raise rates in June—possibly even April.
- "We still look for a first move in July, but the odds of something happening earlier are increasing a bit." - Michael Gregory, senior economist at BMO Capital Markets.
Who could have seen that coming? It's almost enough to send a chill up your spine, isn't it?
For those faithful readers for whom the fear of rising rates causes distress, consider this new option from TD Bank: a 10-year fixed rate of 4.99%.
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