Invesco Canada blog

Insights, commentary and investing expertise

Interest-rate outlook: Long-term U.S. rates now more dependent on global monetary policy

After hitting lows for the year in June, 10-year government bond yields rose to a two-year high of 1.89% in July,1 as the Bank of Canada (BoC) unsurprisingly increased its benchmark rate from 0.50% to 0.75%.2 The accompanying statement was upbeat as well, brushing off softer inflation numbers as temporary. The BoC’s optimism will probably keep the possibility of another rate hike alive at each of its upcoming meetings. We expect interest rates in Canada to rise from current levels, but we are looking for signs that rates may have topped out in the short term.

Continued

Leave a comment

Up, up and away: BoC hikes rate

Following recent upbeat comments, the Bank of Canada (BoC) announced today that it would hike the overnight target rate to 0.75% from 0.50%. This is the first rate hike since 2010, as the BoC has become confident that the current “above potential growth” will continue, leading it to take back one of two emergency rate cuts enacted in 2015.

Continued

Leave a comment

Interest-rate outlook: Expect rising rates in Canada

In June, Canadian 10-year government bond yields bounced off their lowest levels of the year, to 1.63%, as first quarter growth came in above expectations and central banks express confidence that monetary policy has accomplished it’s goal.1 The Bank of Canada (BoC), in particular, is less worried about uncertain U.S. trade policy and another substantial drop in oil prices, and becoming worried that excess capacity is beginning to dwindle. Their optimism may prove to be premature as inflation remains very low, so we are watching its stance closely. We expect interest rates in Canada to rise from current levels.

Continued

Leave a comment

Full steam ahead: Fed hawkish, hikes rates

The U.S. Federal Open Market Committee (Fed) hiked its key interest rate by 0.25% today, to a target range of 1% – 1.25%. While the hike was fully expected by the market, recent inflation prints, such today’s May CPI falling by -0.1%, had left an expectation this would be a dovish hike. As it turns out, the Fed announcement was hawkish as it formally announced the details of their balance sheet normalization.

Continued

Leave a comment

Interest-rate outlook: Excess pessimism in U.K.

During the recent rate rally, the Canadian 10-year government bond yield held at 1.45% and has bounced slightly from there, but still remains at the lower end of its recent range.1 Economic data has tapered off from the strong rebound seen in the first quarter and the Bank of Canada continues to keep monetary policy on hold. The U.S.’s recently imposed tariffs on Canadian softwood exports raised concerns about broader trade implications. In addition, a Canadian subprime mortgage lender has experienced a liquidity drain, drawing attention to an area of the mortgage market that is not typically in the news. We would expect Canadian yields to remain supported in any sell-off.

Continued

Leave a comment

Interest-rate outlook: Impact of upcoming British election

The yield on the 10-year Canadian government bond broke through its recent range of 1.60%-1.87%, reaching a low of 1.43% on April 18.1 Geopolitical risks, as well as concerns about elections in France were the big driver as the economic data in Canada has been fairly positive.

Continued

Leave a comment