REAL LONG INTEREST RATE The Bank of Canada 30 year Bond Rate less CPI; also the TSX Real Estate Index

CLICK CHART TO ENLARGE

Real Rates of return fall with the rise in CPI or the drop in nominal yields and are defined as "the nominal rate less CPI".

The chart above shows that in May 2017, the real long interest rate (purple plot line) ticked down 2 beeps on a zero change in CPI at 1.6%. The last near term CPI low was 0.8% in April 2015. CPI was 2% on the FEB 2017 print which is the BoC target but 8.2 years of ZIRP and NIRP has not changed the fact CPI deflation is in a long term downtrend.

The July 2016 TSX real estate high (green dotted plot) looks to be forming the right shoulder of a classic head and shoulders formation and the real long rate troughs are happening much sooner since the TSX real estate breakout in 1Q 2015.
​​

The ongoing commodity deflation reflects withering global GDP and although Canadian exporters benefit from CAD currency depreciation in the short term, importers and Canadian consumers have to trade more of those depreciated and often borrowed loons to maintain lifestyle. 

​My August 31, 2015 blog post "Japan-ification" charts CPI in Canada, the U.S., Germany and Japan since the 1950's. CPI inflation "ended" in the mid-to-late 1970's, to be replaced by asset and paper inflation. 
​
It's worth noting on the chart above that the six 30 year real bond yield bottoms line up with the interim lows in the TSX Real Estate Index and made good entry points to go long real estate.​ Is there another good entry point forming?

​The sixth negative low could be a head fake; the recent TSX real estate rally is up against resistance and a triple top that has already shot up over 200% since the 2009 Pit of Gloom.
​

​
Mark your calendars, 2016 has been a hot one for real estate bulls but can they exponentially grow their argument or will it decay with sales resistance under the growing mountain of debt.