l****z 发帖数: 29846 | 1 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.
Output shrank by 0.2%, the most in 11 months, to an annualized $1.65
trillion, Statistics Canada said Friday in Ottawa. The median forecast in a
Bloomberg economist survey was for output to be little changed.
Manufacturing declined by 1.9% in November, with losses ranging from
machinery and equipment to plastics and rubber.
The Bank of Canada unexpectedly lowered borrowing costs last week for
the first time since 2009, saying the move was meant to provide insurance as
the slump in crude oil, the nation’s biggest export, weighed on the
economy.
"Insurance"
The Bank of Canada called the rate cut "insurance". Insurance from what? If
they think it will halt a recession, it won't. The recession is here. There
is no need to wait for another quarter of declining GDP to confirm. A
Canadian recession is underway.
US Will Follow
I remain amused by all the pundits who think the US has "decoupled" from the
global economy and will grow stronger in 2015.
Here's news: "It won't", just as China did not decouple from the global
economy in 2008-2009 (a widely-held thesis I also knocked at the time). |
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