April 12, 2019 | By Hank Cunningham
Bond yields are at what we believe to be the lows for the foreseeable future. Economic conditions are constructive with no recession in sight. There is little upward pressure on yields now either. As such, we see 10 year U.S. Treasury yields settling into a range of 2.40 – 2.80%. It would take further proof that economies are still growing, along with modest upward pressure on inflation and wage growth for yields to break out from here. As well, a breakthrough in the important area of trade would add impetus to any upward yield movement.
Canadian bond yields are so low compared to the U.S. (our ten-year is 80 basis points lower) that we are not attracting much in the way of foreign investment flows. The sharp drop in 5-year yields, and thus mortgage rates, augurs well for the housing market.
The corporate bond market, both investment-grade and high-yield, remains solid; yield spreads narrowed in March.