Canada Housing Trust reduces sales of mortgage bonds
| Friday, 24 December 2010 courtesy of mortgage trends
With the country’s second largest debt issuer reducing mortgage bond sales this year and looking to continue the trend next year, mortgages for consumers may become more expensive.
Canada Housing Trust, the financing arm of the nation’s housing agency, sold $39.4 billion this year, a drop of 16 per cent, according to data compiled by Bloomberg News. Issuance increased to a record C$46.9 billion in 2009 as the financial recession limited other sources of funding for banks and mortgage lenders.
“It was becoming apparent in spread performance that maybe the supply was outpacing demand,” David DesLauriers, managing director of government finance at Toronto-Dominion Bank, told Bloomberg News. “The program started to lower the size of the issues.”
Although many factors influence mortgage rates, reduced sales of Canada mortgage bonds may mean more expensive mortgages for consumers as banks turn to higher-cost funding sources, DesLauriers said. Canada mortgage bonds are backed by the federal government, making them a relatively inexpensive form of financing.
Canada Housing, the nation’s largest debt issuer after the federal government, sold $23.8 billion worth of five-year fixed-rate bonds, $7.9 billion of five-year floating-rate bonds and $7.8 billion of 10-year fixed-rate bonds this year.
Canada Housing has “done a better job aligning the size of mortgage bonds with investor demand,” Andrew Hainsworth, director of debt capital markets at Bank of Montreal, told Bloomberg News. “They want to get a little bit of spread performance out of CMBs. It’s also part of the repairing of the credit markets after the financial crisis.”