da’s “output gap” – the economy running below its potential – which he estimates at roughly negative 1.3% of GDP.
In that setup, he argues Canada’s 2-year yield, around 2.876% on Monday after a small dip, could drift toward roughly 2.3% over the next six months. The tension: markets are still leaning toward further Bank of Canada tightening later on, even as Rosenberg says weaker growth and potential new US tariffs could make that rate path hard to justify.
Why should I care?
For you: Canada’s 2-year at 2.876% quietly shapes what lenders can offer.
A 2-year Government of Canada yield is basically the market’s best guess for where the Bank of Canada policy rate is headed over the next couple of years. Banks use that expectation when they raise short-term funding and when they hedge their exposure in interest-rate swaps, which helps set the floor for many shorter-dated borrowing rates.
So if Rosenberg is right that the 2-year yield can fall from 2.876% toward about 2.3% as the Canada–US gap widens from roughly -140 to -160 basis points, it can reduce upward pressure on rates people actually touch, like variable-rate loans and some fixed-rate mortgage offers. The tradeoff is that the same move often pulls down the returns on rate-sensitive savings products too, especially shorter-term GICs, because those rates compete with what investors can earn in safer government bonds.