Artis Real Estate Investment Pref Shs Series E T.AX.PR.E

RE:Interest rates

[Torontojay]

To add to this discussion, the spread between a 30 year fixed mortgage rate and a 10 year treasury is about 1.5-2%. If we use this as a guide then a 3% 5-year government bond yield is equivalent to about a 4.5-5%  5-year fixed mortgage rate. In theory, it should be less than a 1.5-2% spread because Canada has a lower duration term (5 years vs 30) and consequently less duration or credit risk. 

When the Bank of Canada reduces its policy rate then the variable rate on the mortgage will normalize and be lower than the 5 year fixed term. The long end of the curve is not as sensitive to interest rate cuts as the short end of the curve.