BoC 30yr Bond Rate less CPI and the TSX Real Estate Index
Real Rates of return fall with the rise in CPI or the drop in nominal yields and are defined as “the nominal rate less CPI”.
The chart above shows that in February 2016, the real long interest rate broke down into a negative yield as both the nominal rate fell and CPI moved back up to the loonie depreciated 2% BoC target.
The ongoing commodity deflation reflects withering global GDP and although Canadian exporters benefit from currency depreciation in the short term, importers and Canadian consumers have to trade more of those depreciated loons to maintain lifestyle.
