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How Canadian bond yields affect your mortgage

In Canada, government bonds are known to be especially secure investments, since the Canadian government is highly unlikely to default on a bond repayment. For the lifetime of the term of the bond—say, five years—the buyer also gets interest payments on the money the government has borrowed.

This amount is a portion of what makes up the bond’s yield – in other words, its return. The yield can be calculated as yield to maturity (YTM) or as a simpler coupon yield. Essentially, a coupon yield is a percentage of the face value of the bond that is paid at set intervals, such as 10% per year. Yield to maturity, on the other hand, is the entirety of the interest payments you get throughout the bond’s lifetime as well as any losses or gains, depending on whether you purchased the bond at a premium or a discount. This calculation provides an…

Read more at www.mpamag.com

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