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Bank of Canada Holds But Borrowing Costs Rising

Bank of Canada Hero
It’s our favourite day in October. Not Thanksgiving, Halloween or the start of the NHL, but another Bank of Canada announcement. This morning the Bank (as expected) held rates at 5%, the same level we’ve been at since July. I take this as good news, there are only so many more rate hikes the market can bear.

When the Bank paused earlier this year, it convinced the bond market rates were dropping soon. As the chart shows, bonds yields dropped significantly in the month after the March/April pause. The market was convinced the worst was over and lower rates were around the corner.

That’s changed since the summer. After the last three announcements – including a ”hold” in September – borrowing costs have increased. The bond market has received the message: this isn’t temporary. It doesn’t seem there’s a rate cut anytime soon, and the market is adjusting to that reality. The good news: perhaps no further hikes are needed, the message is clear. The bad news: higher costs and a drag on deals as financing becomes harder.

Bank of Canada Graph

Summary
The Bank of Canada held the target rate at 5%, as widely expected. However borrowing costs continue to rise despite the pause from the central bank.


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Adam Jacobs

Head of Research | Canada

Toronto Downtown

Colliers Canada's head of research, leading a cross-country team of 20 mapping, analytics and research professionals. Formerly head of Canada research at Cushman Wakefield and Director of Analytics at Oxford Properties. Featured in mainstream publications such as the Toronto Star, industry publications and podcasts. Specializing in the big picture and the fundamentals driving real estate - demographics, the macro environment and the global economy. 

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