The Loonie Hour Bank of Canada Slashes Rates Ahead of Massive Federal Budget
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Sep 19, 2025 This week features a cutting analysis of the Bank of Canada's rate decisions and their impact on the housing market. Despite the rate cuts, the hosts discuss why recovery may be slow due to fixed-rate mortgages and high listings. They dive into federal debt challenges and the implications of recent Fed actions, including construction sector strain. Plus, they highlight China's record coal consumption and the IEA's forecasting on fossil fuel demand, underscoring the ongoing reliance on traditional energy sources.
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Watch Bond Yields, Not Just BoC Cuts
- Do not assume a single 25 bps cut meaningfully boosts housing demand because most mortgages are fixed-rate.
- Monitor five-year bond yields, not just the BoC overnight rate, to judge mortgage affordability shifts.
Expect Volatile Bond Reactions
- Market moves often 'buy the rumor, sell the fact' so bond yields can rise on a cut day if expectations shift.
- If markets fear a bigger budget deficit, the five-year yield bottom may already be behind us.
Refinance Game Drives Policy Pressure
- Governments and treasuries prefer lower short-term rates to ease refinancing costs as large tranches mature.
- That creates pressure on central banks to loosen policy even when growth is weakening.