Courtesy of Mish.
On January 21 when the Canadian Central Bank unexpected slashed interest rates, I wrote Canadian Recession Coming Up.
Following the rate cut, the yield curve in Canada inverted out to three years. Inversion means near-term interest rates are higher than long-term rates.
I saw no other person mention the inversion at the time. An inverted yield curve generally portends recession.
Nine days later, the Canadian yield curve is still inverted. Let’s compare what I posted about the curve on January 21 vs. January 30.
Canadian Yield Curve January 21
- 30-year: 2.044% (Today’s Low 1.998%)
- 10-Year: 1.426% (Today’s Low 1.366%)
- 05-Year: 0.791% (Down 19 basis points, an 18% decline)
- 03-Year: 0.590% (Down 27 basis points, a 31% decline)
- 02-Year: 0.560% (Down 29 basis points, a 34% decline)
- 01-Year: 0.580% (Down 34 basis points, a 37% decline)
- 01-Month: 0.640% (Down 22 basis points, a 26% decline)
Canadian Yield Curve January 30
- 30-year: 1.834% (Down 21.0 basis points)
- 10-Year: 1.250% (Down 17.6 basis points)
- 05-Year: 0.603% (Down 18.8 basis points)
- 03-Year: 0.386% (Down 20.4 basis points)
- 02-Year: 0.392% (Down 16.8 basis points)
- 01-Year: 0.490% (Down 9.0 basis points)
- 01-Month: 0.580% (Down 6.0 basis points)
Not only did yields plunge across the board since then, the yield curve is still inverted all the way out to three years.
Recession Has Arrived
There is no point in waiting for further data. The Canadian recession has already arrived.
On Friday, the Financial Post reported Canada GDP Shrinks on Biggest Factory Drop in Six Years.
The Canadian dollar plunged below 79 cents US today after data showed Canada’s gross domestic product contracted in November as manufacturing dropped the most since January 2009 and on declines in mining and oil and gas extraction….