Mortgage rates have thus far evolved in-line with our December 2010 forecast, with the 5-year fixed rate reaching 5.44 percent and the 1-year rate hitting 3.50 per cent in mid–February. Mortgage spreads (the difference between a fixed mortgage rate and the yield on Government of Canada bonds) have returned to historically normal levels and we expect these spreads to remain fairly stable in subsequent quarters. Therefore, the path of future mortgage rates will be largely determined by changes in government bond yields, which have moved significantly higher in recent months but are currently being pushed lower by world events. We anticipate that, barring a growth depressing and sustained rise in oil prices, yields will move gradually higher throughout the year as markets price in improving economic conditions and higher inflation expectations. Rising yields will in turn lead to higher mortgage rates, likely in the realm of 4.35 per cent for a 1-year and 5.90 per cent for a five-year fixed rate mortgage by the end of the year. Sentiment about the US economic outlook has improved dramatically in the two months since our last forecast. This is very good news for the Canadian economy and also very good timing as the economy is likely to face some headwinds in 2011 from potential consumer restraint, exchange rate pressure on exports and slowing residential construction. However, the increasingly positive economic outlook is already in danger of being swept aside by a looming crisis in the Middle-East and North Africa (MENA) region that is threatening spill-over to global markets and Canadian interest rates.