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Canada and U.S. bond yields
December 16, 2014
8:49 am
Greg Franklin
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I noticed the last 3 or 4 weeks now that 5, 10, 30 year Canada and U.S. bond yields have really come down pretty fast.

Canada bond yields are down quite a bit more compared to U.S. bond yields since last December-2013, 12 months ago with a 0.97% to 1.16% decline in yields. This is anywhere from 30% to 43% cut to yields in just 1 year.

It seems to be that there are many reasons that are impacting bond yields such as the deep drop in oil prices of about 48% from summer-2014 highs, about 6 months ago, weaker Canadian job growth and GDP, European bond yields crashing to new lows, China's slowing growth plus the Russian Ruble crashing 50% against the U.S. dollar and emerging stock markets and currencies falling anywhere 15% to 20%%+ in recent months, Brazil Real, Turkish Lira, South African Rand etc...

It looks like 10 year Canada yields have dropped the most from around 2.91% to 1.75%, Canada 5 year yields are down from around 2.26% to 1.30% and 30 year yields are down from 3.26% to 2.29%.

Canada bond yields are nearing close to their all time low of July-2012 and can they go lower is the question and for how long. Many times it seems that they hit bottom but reach lower yields.

U.S. bond yields were 2.05%, 3.00%, 3.92% in December-2013 versus 1.54%, 2.08%, 2.72% in December-2014.

Now with GIC rate promotions and bonus interest rate promotions ending soon, it looks like GIC rates could be falling in coming weeks in 2015 unless bond yields reverse and go higher.

Just thought that this information might interest someone as they impact 3-5 year GIC rates the most and it show someone how GIC rates can be set by financial institutions that is beyond their control. There is always the other factors like how much they need deposits to lend out.

Take care and hopefully GIC rates, savings account rates will be higher in 2015.sf-smile

December 16, 2014
9:20 am
Greg Franklin
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Sticking with the topic of bond yields, I just read that the Russian central bank has just raised their interest rate yesterday, December-15-2014 to 17.00% from an already high 10.50%.

I am hearing that for now they are not using currency controls but yikes, how long can they pay 17% and I noticed that that some of their bonds 3 to 6 months are at 20% to 21%+.

We are now seeing 2 different extremes with very low rates and very high rates with the developed versus emerging markets.

December 23, 2014
3:19 pm
Greg Franklin
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Well, a week later and there has been a sharp rise in U.S. and Canada bond yields.

U.S. 5, 10 and 30 year bond yields are 1.74%, 2.26%, 2.89% and Canada 5, 10 and 30 year 1.44%, 1.90% and 2.42%.

This is anywhere from a 6% to 13% jump in annual income from these rates in just 1 week but they up from almost historic lows July-2012.

All time highs of the U.S equity, stock markets 18,000+ Dow Jones etc. and U.S. Federal Reserve maybe being more tight with interest rates, maybe raising them sooner that is plus higher U.S. GDP 5.00% in 3rd quarter which I did mention this in another post is probably why the the last 7 or 8 days brought much higher bond yields.

We will see what 2015 brings in regards to higher, stable or lower interest rates and if they go higher, will they stay higher for longer?

December 23, 2014
4:08 pm
Greg Franklin
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I was just talking with a coworker nad good friend of mine that I used to worked with before my back injury who is almost 62 and his son has a 2 year old and was not particularly happy having the $20,000 in RESP's sitting in a 2.05% savings account with Meridian Credit Union for now 10 months.

He was looking at some 16 to 16.5 year, 2031 zero coupon government, corporate strips ranging from 3.60% to 3.80% today with higher credit quality.

They want something to grow much more than 2% to 3% annually by the time his son graduates. He was thinking of maybe doing a 50%/50% split between 3.00% 7 year RESP GIC's and these 3.60% to 3.80% 2031 zero coupon bonds.

Higher bond yields may sway them to go all long to hold maturity zeros if they reach 3.80% to 4.00%+ in coming weeks.sf-smile

January 7, 2015
4:45 pm
Greg Franklin
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They just don't want to keep falling. Interest rates more specifically Canada, U.S. bond yields that is.

We are now 2 weeks later much with lower bond yields, Canada 5, 10, 30 years are 1.22%, 1.65%, 2.21% and U.S. 5, 10, 30 years 1.49%, 1.97%, 2.53%.

If Canada bond yields go any lower, they will be at a new record low. Many times fixed income, bond analysts said we would not see these low bond yields again but here we are.

European bond yields putting pressure are lowering the bar so to speak and it looks like the trend for bond yields is down and if they stay low long enough, we will probably see lower 3 to 5 year GIC rates as well incoming weeks.

I hope, I am wrong about lower bond, GIC yields, rates. This may impact dividend yields as well on the the high yield but more likely safer, rated dividend paying companies paying lower yields.

September 11, 2019
8:10 pm
Bud
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The 5 and 10yr Canada have jumped more than a quarter point in the last week. Significantly though Trump is hammering away to dramatically lower rates. Will he succeed? He makes a good point why is the most powerful country in the world paying higher rates than the g7.

https://www.marketwatch.com/investing/bond/tmbmkca-05y?countrycode=bx

https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx

@realDonaldTrump
The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet.....

6:42 am · 11 Sep 2019·Twitter

@realDonaldTrump

....The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”

September 17, 2019
11:22 pm
Bud
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"The Fed carried out its first overnight repo auction in a decade to bring the benchmark federal-funds rate, which jumped to a high around 9%, back into a desired 2%-2.25% range."

https://www.google.com/amp/s/www.marketwatch.com/amp/story/guid/FB2069F4-D97A-11E9-8C54-21F955B4E0E6

https://www.cnn.com/2019/09/17/business/overnight-lending-rate-spike-ny-fed/index.html

Maybe Saudi attack caused panic

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