Canadian Bond Rally

Ben Bernanke’s recent comments about the current state of affairs in North American financial markets has left many wondering what is coming next. Between quantitative easing and other measures Bernanke has also spoken louder through action than through words as Russia and China both pull away from the US dollar. The US treasury bonds have risen slightly in value however and the Federal Reserve has assured everyone that a massive sell off is unlikely due to this renewed strength.

The job market in the US paints a very different picture though, in light of lackluster job growth in November alongside diminished GDP this year the United States paints a very bleak forecast for the near future. US treasury bond yields continue to be extraordinarily low (at 2.5%) and this alongside serious doubt in the country’s economic stability overall does not fare well with regard to its effect on Canada.

The real story here is that US bonds are on the verge of being completely useless and as a result the USD is sure to suffer. Those who are active in the forex currency exchange should take note of these developments and not make assumptions based solely on bond yields numbers. Both the CAD and USD are of course joined at the hip in many ways and should (typically) be paired with other currencies unless of course you can spot a correction hitting one currency sooner than the other. In this case this would probably be a good indicator and something worth while to explore.

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.