The Bank hiked 25 bps. The 5-year bond moved 85 first

I made a bet on Sunday, so here is the score

Last Sunday I wrote that the 5-year bond was up 77 basis points while the Bank of Canada sat still. I also put a marker down. If the 5-year Government of Canada yield moved more than 15 basis points either side of 3.50% after Wednesday's decision, I would call it a surprise to the bond market. It didn't.

Here are the closes from the Bank's own series, October 22 through October 29, the latest day published as I write this: 3.50, 3.56, 3.58, 3.57, 3.62, 3.58. Decision day, October 28, was the high at 3.62, which is 12 basis points above my starting line. By Thursday it was back to 3.58. The widest gap from 3.50 was 12 basis points, inside my 15. The Bank hiked 25 basis points to 2.50% and the market shrugged.

Friday's close is not out yet at 7 a.m., so "end of week" is really "through Thursday." If Friday blows through 3.65, I will say so.

The hike was the last 1% of the move

This is the part I find more interesting than the score. On October 29, 2025, the day of the last cut, the 5-year closed at 2.73%. On October 27, 2026, the day before the hike, it closed at 3.57%. That is 84 basis points of tightening that arrived with no decision attached. After the hike, the Thursday close of 3.58% makes it 85.

So the 25 basis point hike sits on top of 85 basis points the bond market had already delivered. Put another way, 84 of 85 basis points, or about 99%, happened before the Bank did anything. If you were waiting for the Bank's announcement to tell you whether fixed rates were going up, the answer had been in the bond market for a year.

What that costs, with the arithmetic

Same setup as my last post so you can compare. OREB's September benchmark price is $623,500, 20% down means a $498,800 mortgage, 25-year amortization, Canadian semi-annual compounding. I hold the lender spread at 65 basis points over the 5-year bond, the last gap I measured in my September 27 post. That spread is an assumption, not a quote. Aggregator rate boards disagree with each other, so I won't pretend one is gospel.

At 2.73% plus 0.65%, the rate is 3.38% and the payment is $2,459 a month. At 3.58% plus 0.65%, the rate is 4.23% and the payment is $2,686. The difference is $227 a month, or $2,730 a year (227.48 times 12).

How much of that is the hike itself? Take the 4.23% rate and add the 25 basis points: 4.48% is $69 a month more than 4.23%. So if the whole 25 basis points flowed into a fixed rate, it is worth about $69 of the $227. The other $158 was already in the price of money before Wednesday.

Which means the people who feel the 25 basis points directly are variable-rate borrowers, whose rate tracks the Bank. Fixed-rate buyers and anyone renewing a five-year term mostly felt it as the bond drifted up through the year.

What the 2-year is saying about December

The 2-year yield closed at 3.36% on October 29. A week earlier it was 3.22% against a 2.25% policy rate, a gap of 97 basis points. Now it is 3.36% against 2.50%, a gap of 86. The hike took 25 basis points out of the gap while the 2-year rose 14, so the market is still pricing the Bank above where it is today.

I read that as an expectation, not a forecast. The next decision is December 9, and I'm not going to tell you it is a hike or a hold. My own last post on pricing was about what the hike does to your list price, and the OREB October numbers, usually out in the first week of the month, will start scoring that.

Where this leaves a buyer or seller

If you are buying, the useful number is the rate your lender will quote you and the rate they will test you at, not the headline policy rate. If you are selling, the useful question is how much of the rate increase your likely buyer has already absorbed. On a fixed rate, about 85 basis points of it.

I sell houses. I don't sell mortgages, and none of this is mortgage advice. Your mortgage broker or bank can quote you an actual rate and an actual qualifying rate today, which beats my assumption of a 65 basis point spread.

One more bet

I'll go again. By the close on December 8, the day before the next decision, my bet is the 5-year sits within 15 basis points of 3.58%. If it breaks that range in either direction before the Bank speaks, the bond market is telling us something new, and I'll write it up.

If you want to know what this does to your own price range, or whether to lock in or wait, call or text me at 613-262-6545 or email fil@613realtor.ca. I'd rather run your numbers than send you another rate headline.