Canada’s 5-year bond yield made a new multi-decade low yesterday, falling to 2.51%.
Yields have plunged for several reasons…
- Inflation is not only in check, but people are increasingly talking about global deflation
- The stock and commodity market collapses have people running for cover in safe government treasuries
- With our sputtering economy, the Bank of Canada seems poised to cut rates again in December
Today the 5-year bond yield is a bit higher at 2.58%. The spread between 5-year posted mortgage rates and bonds yields, however, is now seemingly absurd at 4.62%. The norm is 2.50%.
Then again, posted mortgage rates have remained stubbornly high as of late. For that reason they seem to be a less telling indicator of market rates than they once were. BMO’s recent move to cut its mortgage discount instead of lowering its posted rate is case in point.
Partial sources: Bank of Canada, InYourBestInterest.ca
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Quote du jour….
“People are denying it, but we are mirroring the whole Japanese situation and if that’s the case interest rates are going to go a lot lower.” – RBC Capital U.S bond trader, Tom Tucci (via Bloomberg)
We are interesting times indeed. Rates may be low (BoC) but banks may not give the break to the consumers. This may mean stocks may be in a period where returns come and go, but over time remain low or even negative over many years. This includes real estate.
regards,
Brian
Hi Guys,
There is a great video on US Bond yields vs. dividends (S&P 500 dividend). In a nut shell the lack of confidence in the market is very disturbing (the lowest in over 50 years).
The video is from the Financial Times. (London, England)
http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html
Mike, if you are out there and are younger than 80 years old this maybe “the big one” unless you grew up in the 1930’s.
regards,
Brian
Hi Guys,
There is a great video on US Bond yields vs. dividends (S&P 500 dividend). In a nut shell the lack of confidence in the market is very disturbing (the lowest in over 50 years).
The video is from the Financial Times. (London, England)
http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html
Mike, if you are out there and are younger than 80 years old this maybe “the big one” unless you grew up in the 1930’s.
regards,
Brian