The inflationary vibe affecting bond yields — and odds of a rate hike

Skip to Content News Archives Economy Defence Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Defence Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Defence Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeReal EstateMortgage RatesThe inflationary vibe affecting bond yields — and odds of a rate hikeRobert McLister: If an upcoming rate hike lands, the Bank of Canada will likely hint there’s more where that came fromShould the forward market be proven right, our central bank will have wiped out the variable-rate edge entirely by the end of next year. Photo by David Kawai/Bloomberg via Getty ImagesOil is back above the magic number — $100 per barrel — and rate markets are not applauding.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountWith both major crude benchmarks (WTI and Brent) above the century mark, central banks are growing anxious that higher energy costs will leak into other goods and services.That inflationary vibe is propping up bond yields, which steer fixed rates, and central-bank hike odds, which variable-rate borrowers should be eyeing the way a gazelle eyes tall grass.This advertisement has not loaded yet, but your article continues below.As this is being written, market-implied odds of a Bank of Canada hike next Wednesday sit at 78 per cent.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againFloating-rate borrowers, in other words, should brace for impact.If that hike does land, the Bank of Canada will likely hint there’s more where that came from. That should cool some appetite for variables, which have been more popular than they should be given the forward rate outlook.As for terms, the three-year fixed is the pick of the litter for most conventional borrowers, given its balance between medium-term rate security, upfront cost and flexibility.On the insured side, the cheaper five-year fixed models out better — relative to the forward rate outlook.Nationally-advertised rates three-years start at 4.39 per cent for insured mortgages and 4.59 per cent for uninsured.Right now, that’s 109 and 95 basis points more, respectively, than a variable will cost you.Give it a week, though, and that edge likely shrinks by 25 basis points, assuming bond traders have read the tea leaves correctly.And if the forward market is right (a non-trivial assumption), our central bank will have wiped out the variable-rate edge entirely by the end of next year.Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. 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