If the 5-year bond yield dropped to 2.60% in February 2025 following Trump’s tariffs, and the last time it was at this level was in June 2022, it suggests a few key implications for the fixed-rate mortgage market:

1. Falling Bond Yields → Lower Fixed Mortgage Rates

• Fixed mortgage rates are closely tied to 5-year Government of Canada bond yields.
• A decline in bond yields means lenders’ borrowing costs are lower, which typically leads to lower fixed mortgage rates.
• This could make fixed-rate mortgages more attractive compared to variable rates.

2. Market Reaction to Tariffs → Economic Slowdown Concerns

• When Trump previously imposed tariffs (e.g., in 2018-2019), markets reacted with uncertainty and volatility.
• If tariffs were reintroduced in early 2025, investors might fear slower global trade, economic contraction, and lower inflation, pushing them toward the safety of bonds, causing yields to fall.
• The market may be pricing in the possibility that central banks could cut interest rates to support the economy.

3. Mortgage Strategy: Should Borrowers Lock in a Fixed Rate?

• If the 5-year yield is at 2.60%, it suggests that fixed mortgage rates are decreasing.
• If the economy weakens and the Bank of Canada cuts rates further, variable rates may become more attractiveover time.
• However, if inflation risks remain or rates start rising again, locking in a lower fixed rate now could be beneficial.

Conclusion:

The drop in the 5-year bond yield to 2.60% in February 2025, similar to June 2022, signals lower fixed mortgage rates, but also economic concerns related to tariffs and potential rate cuts. Borrowers may want to monitor central bank signals before deciding between fixed vs. variable rates.