In the 1980s and 1990s, U.S. and Canadian 30-year yields were far above today’s, but stocks still soared and economies boomed.Nathan Denette/The Canadian Press
Canadian 30-year bond yields have increased by more than 50 basis points since early March. Super-long-term rates are also higher in the United States and elsewhere. Some squawk they are a “canary in the coal mine” signalling trouble, including tightening credit, resurging inflation, debt overload and more.
What they miss: Rising long rates steepen the far end of the global yield curve. A bullish sign – especially since they are so unloved! Let me show you.
My May column detailed the stealthy bullishness of steepening yield curves. Steepening yield curves – when long-term rates rise versus short-term rates – boost new bank loan profits. Banks borrow at short-term rates (think: deposits) to fund longer-term loans. The spread is their profit. Hence, steepening yield curves incentivize lending, helping commerce, stocks and GDP.
Fundamental positives that aren’t just ignored but hated and feared are doubly bullish. Those fears build bull markets’ wall of worry and crush expectations, making bullish positive surprises likelier.
Opinion: The global yield curve’s silent re-steepening – and how stock investors can profit
As 30-year rates rise globally, investors react fearfully, including fretting that Canada’s “structural deficit” will spur austerity. Even better: As U.K. 30-year bond yields hit their highest levels since 1998 – paralleling jumpy French yields – bears shriek that these moves foretell debt crises, political upheaval and IMF bailouts. All are age-old head-fakes, repeatedly reheated debt fears – and false. None impair stocks. They mask one simple truth: European and Canadian yield curves have steepened even further than America’s, fuelling regional outperformance – particularly banks and Europe’s industrials.
Consider: After flirting with 5 per cent, U.S. 30-year yields slid below 2024 year-end levels. But British 30-year yields are up 0.35 percentage points (ppt) in 2025. France’s and Japan’s? Up 0.60 and 0.93 ppt, respectively. Canada’s is up 0.30 ppt.
This steepening magnifies bullish non-U.S. tailwinds. While 30-year yields hog headlines, the spread between three-month and 10-year yields is more central to lending (and government finance). Start there. America’s curve, while no longer inverted, is a flattish 0.04 ppt. The U.K.’s flipped from inverted minus-1.08 ppts one year ago to positive 0.64 now. France’s jumped from minus-0.58 ppt to 1.51 and Japan’s from 0.78 ppt to 1.15. Canada’s deep minus-1.16 ppt inversion is now 0.71.
Bump that out to three-month versus 30-year spreads and curves’ steepening becomes starker. America’s flipped from minus-0.98 ppt to 0.66. Canada’s steepened more: From minus-0.96 ppts to 1.18. The U.K.’s shifted from minus-0.48 ppt to 1.46. France’s steepened from flat to 2.33 ppts. Super steep! Even Japan’s climbed from 1.98 ppt to 2.78.
Steeper curves juice bank lending, helping the non-U.S. world more. That partly drives the S&P/TSX Composite’s 20.7-per-cent rise in 2025 and the MSCI Europe’s 26-per-cent advance, both crushing America’s S&P 500 (8.5 per cent). That, despite endless political and budgetary “risks” supposedly underpinning long rates’ rise.
Rising long-term rates and curve steepening also boost value stocks (which Canada, Europe and Japan have abundantly) relative to growth (which dominates America). MSCI Europe and Japan’s value-oriented industrials, up 32.6 per cent and 17.6 per cent year-to-date, respectively, top U.S. tech’s 13.1 per cent. That translates to more lending and more growth-fuelling capital for value-oriented firms.
Railway underperformance skews Canadian industrials collectively lower, but other industrials categories have soared, such as construction and engineering, which is up 22.5 per cent.
Long rates’ credit effects also partly underpin overseas banks’ outperforming America’s in 2025. While U.S. banks are up 17.5 per cent, Canada’s are up 25.2 per cent and Japan’s 25.6 per cent. Europe’s? 64.3 per cent!
European steepening stems from the ECB’s lowering short rates while long rates stayed higher or rose. So don’t presume U.S. Federal Reserve rate cuts would lower long rates. The free market sets them, often bucking central banks’ policy rates. Europe proves that. If America follows suit, the global GDP-weighted yield curve would steepen more.
Yes, some rates – such as fixed-mortgage rates in the U.S. – hinge on 30-year yields. When rates are high, folks looking to finance a home feel pinched. I am sympathetic there. But the stock market and GDP impact? Minimal, and a steeper curve’s bullish effects on loan supply outweigh it. Money’s availability is usually much more important than its price.
Still skeptical? Consider: Through the 1980s and 1990s, U.S. and Canadian 30-year yields were far above today’s. Did disaster reign? No! Stocks soared. Economies boomed.
Since good monthly data begin in 1977, 30-year U.S. Treasury yields topped today’s rate in 63 per cent of history, including much of the 1980s, 1990s and 2000s bull markets. Since Canadian data start, 30-year yields have eclipsed today’s 71 per cent of the time.
Conversely, Japan’s puny yields throughout 2009-20’s global bull market didn’t stop its stocks from lagging and economy sagging.
Don’t fear high long-term yields – cheer them! Headline negativity masks their positive impact on yield curves and lending. Unloved positives are always bullish.
Ken Fisher is the founder, executive chair and co-chief investment officer of Fisher Investments.