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For weeks, the buzz in bond circles has been dominated by speculation the U.S. 10-year Treasury would hit 5%.

It finally did just that on Monday—for the first time since 2007—before collapsing by yesterday's close.

Its u-turn lower was forceful, resulting in a key reversal on the daily chart (typically a harbinger of a new downtrend). Coinciding with the move was talk of massive bond shorts unwinding their positions—i.e., buying back bonds and driving down yields.

Such technical trading phenomenon works against the psychology that's been pushing up rates. But the only reason that's relevant here is because it buys the economy more time to slow. Growth deceleration, not short-term trading psychology, is what'll drive rates back down sustainably.

Nowhere do you hear more mortgage horror stories than in the Wild West of private lending.

Stories abound of private lenders hitting borrowers with egregious fees or suddenly demanding repayment from borrowers who've paid as agreed but have few other options. Indeed, while private lenders are a lifeline to some borrowers, they're perilous if you get in bed with the wrong one.

Equitable Bank wants to help Canadians access the right lender. It sees a need to make private lending more transparent and reliable. So, this week, it's launching a new 40-year amortized mortgage, stress-tested at the contract rate.

The big question

How can an OSFI-regulated lender sell mortgages that don't meet OSFI stress test and amortization standards?

The Competition Bureau fed Canadians to the wolves when approving RBC's takeover of HSBC, and Conservative Leader Pierre Poilievre wants people to know it.

“We have far too much" concentration in mortgage lending, Poilievre told BNN Bloomberg today. "We have these monstrous, government-protected behemoths that dominate 90% of the mortgage market, meaning very little choice for consumers."

“Competition does not happen when the biggest player simply swallows the seventh-biggest player and Canadians are left paying the price.”

As MLN outlined last month, the Competition Bureau failed in its public analysis of HSBC's competitive impact on the mortgage market. Despite acknowledging HSBC's role in stirring up competition—a point no one's arguing—the Bureau insists Big 6 banks are usually too busy competing amongst themselves to pay heed to little ol' HSBC. Thus, HSBC's disappearance "is not likely to result in substantial lessening or prevention of competition," regulators claim.

It's hard to imagine a weaker justification to reduce competition from Canada's supposed competition protector. And note the subjective cover-their-backs qualifying language: "likely" and "substantial."

Poilievre noted that when RBC gulps down HSBC, pending Minister of Finance approval, HSBC's leading mortgage rates "will obviously disappear." He suggested the Finance Minister should force HSBC to sell itself to another non-Big 6 institution, one that doesn't reduce competition. Another option would be requiring RBC to spin off HSBC's Canada's mortgage arm.

Canadians have been forced to "take it" from the big banks, Poilievre says. Regardless of one's political leanings, it's hard to argue that HSBC isn't the most influential, consistently transparent, uninsured rate leader there is. Apart from brokers, no one else keeps the oligopoly as much on its toes.

The Cross-Border Implications of Runaway Treasury Yields

There's no mystery to how rate cycles usually work.

Policy rates go up; inflation comes down in a few years, then rates drop.

That's how it's supposed to work. But, investors worldwide are worried that this time may be different. To increasingly skittish U.S. bondholders, this doesn't look like a textbook cycle.

Buried in OSFI's consultation feedback on Monday was this line:

"Insured borrowers...are exempt from the re-application of the MQR when switching lenders at renewal."

Most mortgage advisors know that this switch exemption applies to grandfathered mortgages—e.g., insured mortgages that closed before November 2016. But, hold onto your amortization tables, folks, because here's a lesser-known fact that's leaving even the savviest mortgage gurus scratching their heads.

Every month, Bay Street economists play a game of economic bingo, and this month, they had their dabbers ready for a 4.0% inflation print. Instead, StatsCan pleasantly surprised us with 'just' 3.8%.

Almost all of Canada's economist herd is now moving in the same direction, predicting no change at the Bank of Canada's Oct. 25 rate meeting. Most forecast the next BoC move will be a cut.

Meanwhile, bond traders played their own game of Rate Hike roulette, slashing rate increase probabilities. By today's close, the #OIS# ball had landed on a 15% chance of a 25 bps hike next week.

But the bond market doesn't want us celebrating a BoC pause too wildly. The swaps market, often the party pooper, still sees a 70% chance of one more hike by next March. There are at least five party crashers convincing the market we haven't peaked on rates yet: