Monthly Market Monitor

Here's what caught our attention this week: short-to-medium Government of Canada yields have come off meaningfully, mortgage bond spreads remain near the tight end of their annual range, and equity volatility has nearly doubled over the past year. None of these in isolation is alarming. Together, they paint a picture worth sitting with. The 1-year GoC is at 2.59%, down 10 basis points on the week. The 5-year is at 3.07%, off 6 basis points. The Bank of Canada overnight rate holds at 2.25%, unmoved across every horizon beyond one month. It appears that rate normalisation is in progress. What remains less clear is the pace, and whether the market is pricing-in something the Bank has not yet communicated.

Featured Metric: Canada Mortgage Bond Spreads

The Canada Mortgage Bond spreads are worth taking a closer Iook at this month. The 5-year CMB spread over equivalent GoC bonds sits at 13 basis points as of April 1, 2026, within a 52-week range of 8 to 17 basis points. The 10-year CMB spread is at 16 basis points, within a range of 12 to 38. Both are near the tighter (lower) end of their annual ranges, inching up 2 and 1 basis points on the month respectively, not a move that changes anything on its own, but worth tracking given where we are in the cycle. This matters because CMB spreads feed directly into the all-in cost of insured multi-unit financing. At the current 5-year spread of 13 basis points over a GoC at 3.07%, indicative all-in financing for a CMHC-insured multi-residential acquisition comes out near 3.20%. To put a number on the spread sensitivity: on a $10,000,000 mortgage amortised over 25 years, the difference between today's 13-basis-point spread and the 52-week wide of 38 basis points is roughly $14,500 in annual debt service. On an asset underwritten at a 4.50% cap rate, that swing implies approximately $320,000 of value erosion, material in any underwriting model that treats spread assumptions as stable. The current environment supports execution. It also leaves limited cushion if spreads retrace toward their wider (higher) range.

Yield Curve Analysis

The Canadian yield curve is steepening gradually and, by most measures, behaving normally. The 1-year GoC at 2.59% sits 48 basis points below the 5-year, and the 5-year sits 69 basis points below the 20-year at 3.76%. The 1-to-10-year spread has opened to roughly 88 basis points, a modestly positive slope consistent with a market that has moved past inversion and is repricing for a longer, more stable rate environment. This week's uniform decline across all maturities is the more interesting signal. The 1-year fell 10 basis points on the week; the 10-year fell 3. Short-end sensitivity that pronounced either reflects the market front-running additional Bank of Canada easing, or at minimum pricing no further tightening. Either interpretation is constructive for near-term financing costs. Looking back over twelve months, context matters: the 20-year is still up 63 basis points and the 5-year up 48. The direction of travel over the past week is positive, but we are not back to where we were. We are also watching the 3-year to 10-year segment closely because that stretch of the curve governs commercial mortgage pricing and is the foundation of most mid-cycle acquisition underwriting.

Current Financing Environment

Residential financing has been particularly stable. The CMLS 5-year closed rate sits at 3.99%, at the floor of its 52-week range and unchanged on virtually every measured horizon. The 5-year uninsured fixed is at 4.49%, off 10 basis points year-over-year. The Bank of Canada's weekly benchmark residential mortgage rate is 6.09%, elevated relative to those figures, but it reflects the outstanding stock of mortgages renewing at rates set years ago, not what a buyer would pay today. In multi-unit and commercial financing, insured multi-residential debt continues to price off CMB spreads, producing indicative all-in rates in the low-to-mid 3% range for institutional-quality assets. Uninsured commercial borrowers face a wider range: Corporate A 5-year spreads are at 64 basis points over GoC, Corporate BBB 5-year at 86 basis points, implying all-in financing in the 3.71% to 3.93% range before lender-specific adjustments. Month-over-month, spreads have barely moved, which provides reasonable underwriting visibility for deals closing in the near term. The 52-week BBB range of 73 to 126 basis points is a useful reminder, however, that this calm is not a permanent feature of the landscape.

Market Signals

The Bank of Canada at 2.25% is on hold, not drifting, not signalling, just holding. CORRA at 2.27% confirms it, as do 1-month and 3-month CORRA at 2.27% and 2.29% respectively. Overnight markets are not pricing meaningful near-term movement. RBC Prime sits at 4.45%, flat on the week and down 50 basis points year-over-year, reflecting the easing that has already occurred rather than anything anticipated. CMHC housing starts came in at 250,900 annualised units for the most recent monthly read, down 5.4% over three months but up 9.5% year-over-year. The near-term softness is consistent with what developers have been signalling, financing cost pressure continues to weigh on project feasibility. A slowdown in starts is not a crisis; in a market where purpose-built rental supply has chronically underdelivered relative to demand, it quietly reinforces the fundamentals for stabilised income-producing assets. Ownership affordability remains stretched. Rental demand is not going anywhere.

Our Strategic Positioning

•       Prioritising insured multi-residential acquisitions in markets with sub-3% vacancy. At current CMB spreads, all-in financing below 3.25% is achievable, and deals can be underwritten to stabilised net operating income without using rent growth assumptions to make the numbers work.

•       Staying disciplined on uninsured commercial assets. BBB spread volatility, 73 to 126 basis points over the past twelve months, is too wide to underwrite comfortably on floating or near-term fixed debt. Conservative structures and term extensions are the preference here.

•       Based on these indicators, here's what we are intending to do: hold a portion of acquisition capital in reserve while monitoring whether the short-end yield decline this week is the start of something or a technical blip. Deployment pace will follow spread stability, not calendar pressure.

Macro Context

It is important never to look at real estate in isolation. The TSX is at 32,246, up 29.5% over twelve months, a number that sounds impressive until you notice it's off 5.8% over one month and 3.2% over three. The S&P 500 at 6,396 tells a similar story: up 14.3% year-over-year, down 3.1% on the week and 6.3% over one month. Broad equity markets have had a strong run but are showing some fatigue at the margin.

The TSX REIT Total Return Index at 3,523 is a more sobering read. Down 5.8% over one month, down 10.6% over six months, and sitting well below its 52-week high of 4,322. The gap between general equity performance and listed real estate tells you something about where institutional money is and isn't comfortable. Rate sensitivity still weighs on REITs even as the policy rate stabilises.

The MOVE Index at 96.05 is elevated, up 30.9% over three months, though off its 52-week high of 139.88. US fixed income volatility doesn't stay south of the border; it flows into Canadian credit pricing through cross-border capital and the gravitational pull of US Treasury benchmarks. The Canadian dollar at 0.7186 is near the lower end of its annual range, down 1.1% on the week. That has a quiet knock-on effect for construction costs and development inputs, compounding per-unit delivery costs at a time when purpose-built feasibility is already under pressure. Crude at $101.38 USD per barrel, up 41.8% year-over-year, keeps energy inflation in the picture and gives the Bank of Canada one more reason to move slowly.

Bottom Line

The setup in April 2026 is neither hostile nor obviously attractive. Yields have softened, CMB spreads are near cycle tights, and the Bank of Canada has settled into a hold that is supportive for insured multi-residential underwriting. At the same time, fixed income volatility remains elevated, REITs are underperforming, and starts data suggests the development pipeline is thinning rather than filling. Opportunity exists for investors who can structure conservatively, execute cleanly, and avoid underwriting to conditions that may not persist. Speculative development and aggressively leveraged uninsured commercial acquisitions are harder to justify at this stage of the cycle. Patience, structure, and relationships with lenders who understand the asset class matter more right now than catching the next rate move.

A Final Thought

In the early 1980s, the Bank of Canada's overnight rate briefly reached 20.03%. At that level, a $1,000,000 commercial mortgage carried roughly $200,000 in annual interest. Today, a similar loan on insured terms might carry $32,000. Canadian real estate changed hands in both environments, it always does, though the buyer profiles and underwriting logic looked nothing alike. What's notable is that the investors who made it through the early-80s cycle weren't the ones who held out for normalisation. They were the ones who had structured conservatively enough that normalisation didn't have to arrive on any particular schedule. The risks today point in a different direction, but the principle holds.

Important Disclosures

This analysis is provided for informational and educational purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. The content represents my personal views and analysis of market conditions and should not be construed as a recommendation to buy, sell, or hold any particular investment or security. Past performance is not indicative of future results. Real estate investments involve substantial risk, including but not limited to: market risk, interest rate risk, liquidity risk, leverage risk, and the potential for total loss of capital. Market conditions, interest rates, government policies, and economic factors can change rapidly and materially affect investment outcomes. The interest rates, spreads, and market data referenced herein are subject to change without notice and may not reflect the rates or terms available to all investors. Actual financing terms will vary based on individual creditworthiness, property characteristics, loan-to-value ratios, and lender-specific underwriting criteria. All investors should conduct their own due diligence and consult with qualified legal, tax, and financial advisors before making any investment decisions. This content does not take into account your specific investment objectives, financial situation, or particular needs. No warranty or guarantee is provided regarding the accuracy, completeness, or timeliness of the information presented. While data sources are believed to be reliable, errors and omissions may occur. Market data and economic indicators are subject to revision. Real estate investments are illiquid and may not be suitable for all investors. Leverage amplifies both gains and losses. Forward-looking statements and market predictions are speculative in nature and involve known and unknown risks and uncertainties.