This is a boring post. Not about AI. Not about space stocks (which I also own because theyâre fascinating). Not about whatever headline is moving markets today. Just bonds. Canadaâs long-term bond yields are sitting near multi-decade highs, and itâs mostly being ignored. But I think this is part of the market that quietly drives everything else. Especially mortgages. In Canada, fixed mortgage rates donât really follow the overnight rate from the Bank of Canada, they follow bond yields. So even if people are expecting rate cuts, it doesnât mean fixed rates are coming down in a meaningful way. Weâve seen this before. The central bank can start easing, but if the bond market isnât convinced, fixed mortgage rates stay higher than people expect. Thatâs where things get real for us regular folk. People renewing over the next couple years are still facing much higher costs. Affordability doesnât magically improve. Housing doesnât just bounce because of a few rate cuts. And then thereâs 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. Itâs 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 ¡ 4mo
Boring - but also the most important post the stock bros will continue to ignore. đ¤ˇââď¸đ 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 isnât there then rates can easily take the wind out of a companyâs sails. Always good to keep one eye on rates. đđ
Paul @mrwhite007 ¡ 4mo
Fact of the day: thereâs no such thing as a boring post when itâs typed out by Mr S!
Le Corb@lecorb ¡ 4mo
High yields of bonds compete directly against dividend stock yields. Ouch for me! But for the growth stock bros who donât 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. Itâs 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? đĽ
Michael Conroy@conroy119 ¡ 4mo
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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