Cloudy with a Chance of Recession. New Data Alter the Rate Forecast

Canada's economy needs stormy weather before the sun can shine. And on Friday, we got some dark clouds.

Our economy shrunk, and joblessness surged below the border. For all anyone knows, Canada may already be in the midst of a technical recession (defined as two consecutive quarters of negative growth).

For low-rate enthusiasts, it was a glimmer of hope that the top in rates might be in. Canada's 4-year swap rate dove another 7 bps, per the chart above. And—while it's not unheard of that some banks would hike fixed rates in the next week or so—sliding swap rates make that less likely.

Following the data, the economic establishment hurried to declare that rates had hit their ceiling. But long-time readers will recall us reporting that same market sentiment last spring, and we all know how that turned out.

Here's more of the macro nitty gritty, and what to expect next...