Why long rates in U.S., Canada remain depressed

Low long-term interest rates in both the U.S. and Canada have persisted, leading to lower forecasts for Treasury yields.

In a new report from CIBC Economics, the bank says, “We still see long rates in the U.S. rising over the next couple of years, but no longer [expect them to] get much above the 2.5% we’ve forecast for the long-term neutral rate. Ten-year yields in Canada will [also] move higher, but at a slower pace [since] the BoC [is] lagging well behind the Fed in terms of rate hikes.”

Still, the bank finds, “The sharp deceleration in [U.S.] May payrolls is more likely to be noise than a signal of a slowing economy, [so] we still think that the Fed will raise interest rates again in September […] But we now see only two hikes in 2017, one less than our previous forecast.”

Read the full report for more on what trends are affecting markets.

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