The announcement of impending 25% tariffs on Canada by Donald Trump has led to a significant drop in Canadian swap rates, reflecting diminished expectations for economic growth and inflation. This development has further widened the gap between US and Canadian yields, which is now the largest in decades. The disparity suggests stronger investor confidence and higher growth expectations in the US compared to Canada. As the cost of borrowing in Canada decreases, the US market remains attractive for capital inflows, potentially bolstering the USD against the CAD.
Meanwhile, Mexican swap rates have also declined following disappointing GDP figures, indicating lower growth expectations and the possibility of more accommodative monetary policy to stimulate the economy. The persistent higher US yields could continue to draw investment, reinforcing the US dollar's strength in the region.
As of 16:13 on January 30, the US 10-year Treasury yield (TNX) stands at 4.52, slightly down from its last close of 4.55. The yield opened at 4.49, reaching an intraday high of 4.54, amidst these geopolitical and economic developments.