Canadian Recession Coming Up: Yield Curve Inverts Following Unexpected Rate Cut; Loonie at Six-Year Low

Currency wars pick up steam today with still more unexpected central bank actions. Please consider Canadian Central Bank Unexpectedly Lowers Interest Rates.

Canada’s dollar sank the most in more than three years after the central bank unexpectedly cut interest rates, saying crude oil’s collapse will slow inflation and weigh on the economy.

The currency reached the weakest level in almost six years after the Bank of Canada reduced economic forecasts and lowered the benchmark rate target to 0.75 percent, from 1 percent, where it’s been since 2010. Government bonds climbed, pushing yields on two-, 10- and 30-year debt to record lows. Crude, Canada’s biggest export, has tumbled more than 50 percent since June amid a global glut.

“They are taking pre-emptive steps,” Thomas Costerg, an economist at Standard Chartered Bank, said in a phone interview from New York. “If oil prices remain under pressure, you could potentially see further cuts. This was not expected, and it’s going to put pressure on the loonie.”

• 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)