I would like to reiterate what I have said before: when it comes to financial matters, I see no reason why Canadians should prepare for this coming New Year’s weekend any differently than for any other long weekend. I would now like to turn to the economy and monetary policy.
Interest rate volatility combined with the ability of homeowners to prepay their mortgages without penalty means that the cash flows associated with the holding of mortgage debt directly or through mortgage-backed securities are highly uncertain, even if the probability of default is low. In general, interest rate risk is readily handled by adjusting maturities of assets and liabilities.