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North American yield curves continued to flatten, as short yields moved higher in tandem with the Federal Reserve and Bank of Canada policy moves, while longer rates moved meaningfully lower reflecting a different inflation view than that of the central banks. For example, the 10-year U.S. and Canadian government bond yields were lower by 30 bps and 46 bps, respectively over the quarter.

While rates generally rose through much of 2018, significant declines in the fourth quarter erased much of those increases. By the end of the quarter, the front end of the Canadian yield curve moved from fully discounting a rate hike in 2019 to start discounting possibility of a rate cut by December 2019.

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