30 July 2014

“At the start of this year everyone expected bond yields to go up,” – says Toronto-Dominion Bank chief economist Craig Alexander. “No sharp increase was predicted, but most economists anticipated a modest hike during 2014. And one of the main surprises here was bond yields decline.”

Canadian bond yields usually react to changes in the U.S. yields, as the markets see them as alternatives to one another.

“At the beginning of 2014, we all had certain concerns about emerging markets and the slowdown in China,” – Alexander notes. “But then the U.S. started showing poor economic results with its economy outright contracting. In addition to it, the forecasts on global economic growth were also reduced. And while some worries about emerging markets weakened, people found another reason to worry.”

As a result, a poorer outlook for economic growth in the U.S. and other countries turned out to be good news for Canadian real estate buyers.

In the same time, today we can see the U.S. economy stabilizing with its economic growth in Q2 becoming the fastest since the end of the Great Recession.

Such unexpectedly high annualized growth rate of 4% made some analysts think, whether we should expect a sooner rate increase.