Canada just sold C$1.4B of 30-year bonds at 2.793%. That compares to US 30s which are at 3.368%.
The 61 bps spread between US and Canadian 30s is near the widest since August. Ten-years, meanwhile, are trading generally in tandem. The difference reflects questions about US long-term debt sustainability and inflation. Different regulations may also force Canadian banks to hold more long-term debt.
Expect this trend to continue and and have a mild positive effect on USD/CAD, especially once Operation Twist wraps up. It will reverse if the US gets serious about austerity or the Bank of Canada begins hiking rates.
