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Nice argument, and one that I would like to believe is true, but somehow I think that Canadian rates are tied to US rates irrespective of each nation's deficits and debt. This has been especially true these past several months. Just consider the move in Canadian yields during the middle of March when the Fed announced they were going to buy Treasuries. As your chart above shows, Canadian yields dropped nearly 0.3% for a change of policy affecting US debt. The rise we've seen in Canadian yields this past month might also be simply tied to the rise in US yields.

Still, I hope you're right.

So then it may be worth looking at the relative rate of change in yields.

Sorry, I misread the legend on that chart--please disregard the above.

That feels like a good argument to me. I hope this post gets picked up by some US blogs. Using Canadian data to interpret what's happening in the US isn't obvious.

Stephan, agreed. This is a really good point.

Sorry, that should of course be addressed to Stephen.

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