The rebound in stock prices and a back-up in bond yields pushed the 5-year Government of Canada bond yield (slightly higher than 2.8%) back above the TSX dividend yield (just below 2.7%) on Wednesday.
“This is another indication that financial market conditions are normalizing,” BMO Capital Markets deputy chief economist Douglas Porter said in a note.
Up until the past year, it was unheard of since the 1950s to have bond yields below dividend yields.
As recently as February, dividend yields were 44 basis points above 5-year bond yields (2.86% versus 2.42%). But when 5-year yields bottomed at 1.8% and the TSX dividend yield topped 4.4% in March 2009, Mr. Porter notes that was a “once-in-a-generation asset allocation opportunity.”