This is a boring post. Not about AI. Not about space stocks (which I also own because they’re fascinating). Not about whatever headline is moving markets today. Just bonds. Canada’s long-term bond yields are sitting near multi-decade highs, and it’s mostly being ignored. But I think this is part of the market that quietly drives everything else. Especially mortgages. In Canada, fixed mortgage rates don’t really follow the overnight rate from the Bank of Canada, they follow bond yields. So even if people are expecting rate cuts, it doesn’t mean fixed rates are coming down in a meaningful way. We’ve seen this before. The central bank can start easing, but if the bond market isn’t convinced, fixed mortgage rates stay higher than people expect. That’s where things get real for us regular folk. People renewing over the next couple years are still facing much higher costs. Affordability doesn’t magically improve. Housing doesn’t just bounce because of a few rate cuts. And then there’s the bigger signal underneath all of it… Yields being this high are doing two things at once: • slowing the economy (which helps bring inflation down) • signaling that inflation might not be fully gone That tension matters more than any headline. If you look at history, environments like this tend to shift what works in markets. It’s less about chasing big narratives, more about: • cash flow • durability • not overpaying for long-term expectations Markets can jump around on news or politics, but this is the anchor. And right now, the anchor is saying: things might stay tighter for longer than people expect.
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19 Comments
ETF Go
@etf.go · 6mo
Boring - but also the most important post the stock bros will continue to ignore. 🤷♂️👏 High rates can kill high valuations, eat into profits and can easily slow future project/growth initiatives. Strong fundamentals might be enough to overcome but if that fundamental growth isn’t there then rates can easily take the wind out of a company’s sails. Always good to keep one eye on rates. 👀👍
Paul @mrwhite007 · 6mo
Fact of the day: there’s no such thing as a boring post when it’s typed out by Mr S!
Le Corb@lecorb · 6mo
High yields of bonds compete directly against dividend stock yields. Ouch for me! But for the growth stock bros who don’t get that the inverse of P/E is earnings yield. And that yield MUST provide a greater return than risk free bonds and MIST provide a PREMIUM to the risk free rate. It’s this one small concept I bet most folks know Blossom do not get. Professional bond traders and institutional traders chase the lowest risk but highest return. The premium on the earnings yield has to warrrant the risk to invest in the stock. Rising inflation, rising rates, 2022 all over again, and have a look at what happened to the Mag7 stocks then? 😥
Michael Conroy
@conroy119 · 6mo
Not boring at all imo! A very important data point when analyzing anything macroeconomically. Or for portfolio management. We just renewed mortgage at a lower rate. Was on a 3 yr 5.8%. Early renewed as soon as I could at 4%.
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