Canada’s bond yield curve reverts as recession fears recede
|Toronto Star 04 Apr 2019 at 10:02|
Canadian bond investors can exhale. The yield curve is back to normal, for now, following several weeks in which it had inverted, flashing signals of an impending recession.
The yield on the three-month bill has dipped 3 basis points below the 10-year yield, according to data compiled by Bloomberg. The gap inverted March 21 for the first time in more than a decade, sparking concern that a global economic slowdown and rising household debt would push the economy into a contraction. Longer term yields are generally higher than short-term notes.
Bank of Montreal chief executive officer Darryl White said Tuesday that underlying fundamentals of the economy remain positive, a day after Bank of Canada Gov. Stephen Poloz said that he doesn’t foresee a recession. He said that the current period of “below-potential growth will prove to be temporary.”
The pick up of government bond yields is supporting an increase in corporate bond issues, with companies including the Hydro One Ltd. and Pempina Pipeline Corp. taking advantage of the increase of investor demand to advance their funding plans.