🧭 This Week in Markets
Canadian inflation cooled more than expected in October, but bond markets aren’t celebrating.
The CPI came in at 2.2 % year-over-year, down from 2.4 % in September. However, excluding lower gas prices, inflation was higher at 2.6%.
While gas prices fell sharply, sticky core categories like rent and telecoms kept the Bank of Canada’s comfort level firmly in question.
The 5-year Government of Canada yield ticked higher again to around 2.80%, while the U.S. 10-year Treasury yield hovered near 4%. Fixed-rate borrowers hoping for a reprieve will have to wait a little longer.
🇨🇦 October CPI Breakdown — The Good and the Bad
Headline inflation cooled mostly thanks to gasoline prices (-9.4 % y/y) and slower grocery inflation. Excluding gas, prices still rose 2.6 %, matching September’s pace.
Energy: cheaper winter blends and lower crude pulled fuel costs lower.
Food: grocery prices slowed again but remain elevated.
Cell service & insurance: nudged the index higher.
Bottom line: core inflation remains sticky near 2.6% - 3%.
The BoC will view this as progress, not victory. For mortgage borrowers, that translates to “no cuts in sight.”
🇺🇸 Shutdown Ends, Growth Takes a Hit
The U.S. government shutdown finally wrapped, but not without economic casualties. TD estimates it lopped more than 1 percentage point off Q4 U.S. GDP.
Canadian markets largely shrugged, though the hit reinforces that American momentum is fading — a potential tailwind for yields later, not now.
January looms large: trade rules require Washington to reveal its intentions on CUSMA. If Trump signals he’ll let it lapse, markets will immediately price in recession risk, pushing North American yields — and mortgage rates — lower. Until then, uncertainty keeps a floor under both.
💬 Fed Speaks: The Higher-for-Longer Hangover
Just when markets were hoping for dovish news, multiple Fed officials poured cold water on rate-cut optimism:
Mary Daly (San Francisco Fed): sees risks as “balanced” and is “keeping an open mind.”
Neel Kashkari (Minneapolis Fed): firmly on the fence.
Alberto Musalem (St. Louis Fed): wants to “lean against above-target inflation.”
Translation: no clear path to U.S. rate cuts. The phrase of the week in bond circles? “It’s complicated.”
That stance kept U.S. yields elevated and dragged Canada’s curve up in sympathy.
🌎 Other Market Forces at Play
Upward Pressure: Former PM Carney’s new “energy superpower” fast-track projects may attract capital but also add fiscal stimulus — inflationary in the short run.
Downward Pressure: Thursday’s 1.7 % S&P 500 and 1.9 % TSX sell-offs sparked a modest “risk-off” bid for bonds.
Global Shifts: European regulators are exploring ways to reduce reliance on U.S. Fed swap lines amid concerns Trump could weaponize dollar liquidity. Any erosion of global trust in U.S. credit systems could eventually raise Treasury yields — and by extension, Canadian ones too.
🏠 Mortgage Market Snapshot
5-Year GoC Yield: ≈ 2.8 % ↑ 6 bps on the week
Typical 5-Year Fixed Mortgage: ≈ 3.69 % – 4.04 %
Variable-Rate Outlook: No cuts expected in the near term
Fixed-rate pressure is back, though small lender competition continues to create pockets of sub 4% promos. Variable borrowers remain in limbo — the BoC’s next move hinges on sustained disinflation.
🧩 The Setup: What to Watch Next
December BoC Meeting: Any hint of hawkish tone could push yields further up.
January CUSMA decision: Trump’s trade hand could swing rates in either direction.
Global risk mood: Equity volatility and Fed rhetoric will drive bond flows.
Canadian budget spending: Fiscal expansion still inflationary and rate-supportive.
💡 Takeaway
October’s inflation decline is encouraging — but not enough to take fixed mortgage rates off the pressure cooker.
Yields remain elevated, policy makers aren’t blinking, and the next few months will decide whether fixed rates stabilize or edge higher still.
Borrowers waiting for the “big drop” may have to wait a while longer.
Stay Tuned.