Andrew Allentuck
As 2021 opened, bond yield curves steepened on Jan. 6, U.S. 10-year Treasury yields hit 1% for first time since March of last year. The economy may feel as if it’s beginning a cyclical recovery, but there are several key differences between a recovey and what’s unfolding now.
Ordinary consumer spending has been deferred while ultra-low interest rates have supported purchases of houses and durable goods. The unemployment rate is high (8.6% as of Dec. 31) and consumer debt has soared.
Will bond prices rise, hold or stumble in 2021?
Avery Shenfeld, chief economist with CIBC, said the outlook is grim. “Government bond yields will be low, but they will climb. Reflecting recovery, the yield curve will steepen.” He added that the Bank of Canada is likely to reduce quantitative easing.