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Global Economic Calendar

Canada’s Yield Curve Inversion At Its Widest Level In 30 Years

Canada’s yield curve is now at its widest inversion since the early 1990s, raising the likelihood of an economic recession in the coming months.

The yield on Canada’s benchmark two-year debt has reached 100 basis points above 10-year bonds. It’s the largest inversion in more than 30 years and is widely viewed by economists as a sign that the country’s economy is headed for a recession.

A yield-curve inversion almost always occurs before a recession as investors move money to longer-duration debt amid mounting economic concerns.

Short-term yields around the world are currently inverted as markets price in further interest rate increases from central banks as they try to lower inflation.

While most economists do not see a deep or prolonged recession in Canada, growth is expected to stall in 2023, with the economy potentially entering a technical recession defined as two consecutive quarters of negative growth.

Markets forecast that the Bank of Canada will raise its benchmark overnight lending rate to 4.25% next year before pausing its increases.

Canada’s central bank makes its final interest rate decision of the year on December 7. The central bank’s trendsetting overnight interest rate currently stands at 3.75%.