Well with S&P downgrading the US from AAA to AA, that should send interest rates for a ride. Yup, interest rates just went for a ride all right, and hard. Below is the Government of Canada 5 year note one-year chart:
Yes, interest rates fell when, normally, a ratings downgrade would increase yields. The story to pay attention to isn’t the S&P downgrade, it’s comments like this from Hon. Jim Flaherty on continuing government-led austerity measures in countries that are not running at full capacity:
European and American leaders have demonstrated they have the “will to act” but more needs to be done to rein in global debt and deficits, Canada’s Finance Minister Jim Flaherty says.In an interview Monday, Flaherty told Amanda Lang of CBC News that he is most concerned about European sovereign debt, though he noted that the U.S. also needs to tackle its debt and deficit.“These are fiscal issues; they’re not bank issues, they’re not monetary issues,” Flaherty said. “And it’s very important that Italy, Spain and the others — Portugal, Ireland and Greece — go ahead and implement the programs that they’ve committed to, the fiscal restraint programs, the reforms they’ve committed to. They have to get it done.”
Just throwing it out there… comments like these from Flaherty and others, along with the pudding of actually cutting said governments’ expenditures, may actually be why global stock markets are taking a rather large poo.
What will all this mean for Vancouver and its real estate? Dunno, but two things look baked in for the next few quarters: lower mortgage rates and more employment weakness.