Excess Demand for 5-year Bonds (and Swaps): A Bad Omen for Canada’s Economy?

Since mid-June, Canadian 5-year bonds have outperformed other parts of the yield curve which may signal serious trouble ahead for the housing market and the economy. Moderate and aggressive managers may choose a contrarian view in 5-year rates, a slope trade in the 5-10 year segment, or a more conservative swap spread widening trade.

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