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Bond yields plummeted late last week as economic instability prompted investors to seek the safety of bonds.

This surge in demand drove Canadian bond yields to their lowest levels in two years, highlighting growing concerns about the economic outlook. Poor corporate earnings from major companies, a disappointing U.S. jobs report, and the unwinding of risky carry trades have shaken market confidence.

As rate expert Ryan Sims explained, investors rapidly sold off equities and other investments to repay loans in foreign currencies, driving up the value of those currencies and causing widespread losses across various markets.

“The problem is that the chaos it creates can make for a lot of volatility, and that volatility drives people to the safety of bonds,” he wrote in a recent post to subscribers.

“We saw bond prices up, and yields down this week - especially in the U.S. and Canada,” he noted. “This should lead to some rate reductions on Canadian mortgages - assuming we hold these levels.”

The Government of Canada bond yield fell more than 10 basis points (bps) on Friday alone, which was on top of the steady decline in the preceding weeks.

Ron Butler of Butler Mortgages says Friday’s drop in yields is likely to push fixed mortgage rates even lower next week.

“The ongoing down trend [we’ve seen over] the last two weeks will accelerate,” he wrote on X (formerly Twitter).

Source: Canadian Mortgage Trends