If foreign appetite for Treasuries were to weaken further, the US Treasury would have to offer even higher yields to attract buyers, pushing US (and by extension, Canadian) mortgage rates higher.
Elevated US yields can lift global bond yields, including in Canada, delaying any meaningful decline in fixed mortgage rates, which are closely tied to 5-year bond movements. Meanwhile, a weaker Canadian dollar, resulting from diverging rate paths, could add inflationary pressure, further complicating the Bank of Canada’s ability to cut rates aggressively.
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So far, foreign holdings of US Treasuries have remained robust, totaling just over $9 trillion at the end of April. However, recent data indicate that central banks and sovereign wealth funds have begun to reduce their positions. Bank of America credit strategists warn that…
