22 Jan 2015
Canada first among G-7 nations to have an inverted bond yield curve
FXStreet (Mumbai) - The Bank of Canada (BOC) surprised the markets yesterday by lowering the benchmark rate target to 0.75%, from 1%, where it’s been since 2010. Consequently, the bond markets rose, thereby pushing the yield on 2-year, 10-year and 30-year bond yields to record lows.
Interestingly, Canada is now the first nation to have an inverted bond yield curve- short-term yields are higher than the long-term yields. Across the Canadian bond yield curve, yields on 1-yr, 2-yr, and 3-yr bonds are lower than the yields on 1-month and 6-month bonds. Furthermore, the yield on 1-yr note is inverted with the 2-yr and 3-yr bond yields.
The inverted bond yield curve is usually considered as an early indication of a looming recession.
Interestingly, Canada is now the first nation to have an inverted bond yield curve- short-term yields are higher than the long-term yields. Across the Canadian bond yield curve, yields on 1-yr, 2-yr, and 3-yr bonds are lower than the yields on 1-month and 6-month bonds. Furthermore, the yield on 1-yr note is inverted with the 2-yr and 3-yr bond yields.
The inverted bond yield curve is usually considered as an early indication of a looming recession.