Ottawa’s proposed overhaul of Canada Mortgage Bonds is the wrong decision
proposal, it has provoked surprise and concern in the financial sector, even with a familiarity of the interventionist tactics favoured by government.
The precise details for this overhaul are left to coming consultations. But according to the government, the estimated savings total a probable $1-billion. Further, an upward move in bond yields would need to be even higher to encourage the large contingent of foreign investors in CMB to reinvest in Canada bonds. These investors are now invested $100-billion in CMB, just under half of CMB outstanding, and these bonds carry a yield of 30 basis points above that of regular government bonds. With CMB gone, it will be hard to attract these investors to Canada bonds and keep them in Canadian assets.
It is clear the proposed restructuring of the securitized mortgage market, with consolidation of the CMB market as its centrepiece, will not generate anticipated cost savings needed for affordable housing.
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