In an announcement made on Thursday, the Canadian government unveiled its plans to send $250 to nearly 19 million Canadians, along with implementing a tax holiday on certain goods from December to February. While this measure aims to ease the financial burden on citizens, some experts believe that this policy may contribute to increased inflationary pressures on the Canadian economy. According to expert Ron Butler, this policy is considered deficit spending that could ultimately lead to inflation, leaving bond traders confused about what is happening in Canada.

Experts anticipate that mortgage interest rates in Canada will rise next week, following the recent increase in Canadian bond yields.

Over the past two months, bond yields have risen by more than 61 basis points (0.61%), including a significant increase of about 17 basis points last week. Bond yields are an important measure for determining fixed mortgage rates, meaning that the increase in yields could lead to higher mortgage rates in the near future.

Mortgage experts like Ron Butler expect that fixed mortgage rates will rise in the coming weeks as a result of these increases in bond yields.

Butler stated: “We will see a slight increase in fixed rates,” noting that the rise in U.S. bond yields, which significantly affect Canadian bonds, is the main reason for this increase.

In addition to this increase, financial policies followed by some governments, such as increased government spending, may also contribute to inflationary pressure and drive interest rates up. However, variable interest rates are expected to decrease in the coming months if the Bank of Canada continues to lower interest rates as anticipated.