Upward pressure on rates as bonds rally

Here we go… The bond market rally is squeezing spreads, placing upward pressure on the fixed interest rates. Last week we saw the 5 year bond fall to 1.15 its lowest point since July 24, 2012, more than 10 months ago. Currently the 5 year bond sits at 1.34, up 19 basis points (bps). My Canada Mortgage Direct Rate Barometer above depicts a spread well below the lender comfort zone nearing lows from just one month ago. So what does this mean? A compressed spread signals an interest rate hike is on the horizon. Should we see this rally continue into next week, I suspect…