Bond markets are pricing rate increases that the central bank has not delivered. The overnight rate target stayed at 2.25% throughout the period, while two-year and five-year yields rose to peaks on September 23, the five-year at 3.69%. Fixed mortgage rates take their cue from the five-year yield, so the repricing reaches households before any change in the policy rate.
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Bond investors have priced in tighter policy well ahead of the central bank.
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The Bank of Canada has held its policy rate for seven straight decisions, while the bond market has pushed the 2-year yield well above it,…
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The 2-year yield sits well above the policy rate, which has not changed since October 2025, so bond markets are pricing higher rates.
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The decline from the late-August record spans two trade actions: the U.S.
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The decline from the August 25 close spans the United States tariffs imposed on August 22 and the Canadian counter-tariffs of September 8.
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