Bond yields are an aspect of finance the average Canadian probably doesn’t pay close attention to, unless they are a bondholder themselves. But rising or falling bond yields are a significant economic indicator. A week after Trump’s victory, the Canadian government’s 10-year bond yield climbed 27 basis points to 1.43 per cent. As of December 5, the 10-year bond yield sat at 1.63 per cent. Bond yield is inversely related to bond value, so as yields rise, current bond values decrease and bondholders rush to sell them off. Rising yields cause investors to call for increased interest rates in anticipation of inflation. “People are saying, ‘We’re going to have inflation, interest rates will be higher and existing bonds are being sold off and the value has been falling lower,’ ” says Martin Pelletier, founder of TriVest Wealth Counsel. “People are panicking and selling off their bonds. As bonds sell off, the yield goes up.” So, according to bond yields, Canadians should brace for higher interest rates and rising inflation.
“people are panicking and selling off their bonds”