Look to bond yields after next week's Bank of Canada announcement. They're like a GPS for fixed-rate mortgages

financialpost.com:

With Canada’s official inflation measure now well below the two per cent target, two-thirds of economists think the Bank of Canada will slash its rate by 50 basis points on Wednesday. (A basis point is one-hundredth of a percentage point.)

If this rate-slashing bonanza unfolds, keep your eyes glued to bond yields. Yields are like the GPS for fixed mortgage rates, and fixed rates are what most mortgage shoppers choose. Every borrower wants to know where the Bank of Canada will take rates next, and the bond market could give us those clues.

To a casual rate watcher, one might expect yields to fall, but bond markets are anticipatory. Eventually they start expecting looser Bank of Canada policy to turbocharge the economy and heat up inflation. That’s usually enough for fixed rates to bottom out for a while before rising yields take them higher.

We’re likely not there yet, however. Inflation is still doing its best impression of a lead balloon and the central bank fears it could fall too much below the two per cent bullseye. That’s why bond traders are betting on more cuts than a drunk barber — 100 basis points total by January and a whopping 175 basis points by December 2025, according to forward rate data from CanDeal DNA.

If we get that 100 basis point haircut by January, the overnight rate will fall back to 3.25 per cent. That’s notable because it’s the top end of the Bank of Canada’s 2.25 to 3.25 per cent “neutral rate” range. Neutral is the theoretical sweet spot where monetary policy is neither stimulating nor restraining economic growth.

Usually, rates dive into or below neutral territory. That’s because central bankers are usually late on cutting and overcompensate to ensure inflation doesn’t fall too much. But as we