Government bonds' spread between long, medium, and short maturity Canada 2025

As of January 7, 2025, the Canadian bond market displayed a positive spread of 35 basis points between 10-year and 2-year yields, indicating long-term rates above short-term ones. The 2-year versus 1-year spread, on the other hand, showed a negative 4.2 basis points, suggesting a mildly inverted yield curve.

Negative spreads indicate a (partially) inverted yield curve. This often signals investor pessimism about short-term economic prospects, as investors seek the relative safety of long-term bonds, pushing those yields down relative to shorter-term bonds. An inverted yield curve is typically interpreted as a potential indicator of economic slowdown or recession, as it reflects expectations of lower interest rates in the future to stimulate the economy.