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Government of Canada bond yields are the returns investors require to hold federal government bonds of a given term, and they are the primary benchmark fixed-rate mortgages are priced against in Canada — the 5-year bond yield in particular tracks closely with 5-year fixed-rate mortgage pricing.
Lenders that fund fixed-rate mortgages typically raise money in the bond market for a matching term, then lend it out at a spread above their cost of funds. When bond yields rise, lenders’ funding costs rise, and fixed mortgage rates tend to follow within days to weeks. This is why fixed rates can move even between Bank of Canada announcements.
The Bank of Canada policy rate works differently — it sets the cost of short-term overnight borrowing and drives prime rate, which in turn drives variable-rate mortgage pricing. Fixed and variable rates can therefore move in different directions or at different speeds depending on what is happening in the bond market versus the policy rate.
Watch the 5-year yield: the 5-year Government of Canada bond yield is the most commonly cited benchmark for 5-year fixed mortgage pricing, but lenders also reference other terms for shorter or longer fixed products.
Not a direct pass-through: lenders add a spread for funding costs, risk, and margin, so posted fixed rates do not move penny-for-penny with the bond yield.
Separate from variable pricing: variable and adjustable rates track the prime rate and the Bank of Canada policy rate, not bond yields.
Published daily: current and historical Government of Canada bond yields are published by the Bank of Canada.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
Every term a Canadian mortgage professional needs — defined, sourced, and kept current.
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