Tasha Gerrard | Bond Markets' $1-Trillion 'Trumpflation' Wipeout A Bad Sign For Canadian Housing

Canada’s housing market could soon be suffering from a new condition, one that a TD Bank economist is calling “Trumpflation.”

But "Trumpflation" wouldn't mean rising house prices — it would mean higher mortgage rates, leading to worse times for the housing market.

U.S. stock markets soared in the days after Donald Trump’s electoral victory, betting that his administration will be good for business.

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But the bond markets made a different bet — that Trump’s plans for massive infrastructure spending and tax cuts will cause inflation to rise. Inflation is bad for bond markets, so the bond market tanked last week, wiping out $1 trillion of investors’ money.

The wipe-out was such a jolt to the markets that some analysts on Monday were predicting the end of a 30-year-long bond market bull run.

“Bond markets have interpreted a Trump win as one that will make inflation if not great again then at least rise again,” TD Bank senior economist Leslie Preston wrote in a recent client note.

But she noted Trump’s economic plans are not a done deal.

“Markets may be getting a bit ahead of themselves, as it very much remains to be seen whether this ‘Trumpflation’ will pan out.”

Still, the same “Trumpflation” phenomenon that’s brutalizing the bond markets could also hit Canada’s housing markets, because some mortgages in Canada are linked to U.S. bond yields, and because changes in Canadian bond yields tend to follow trends in the U.S. Read More....