Market Analysis: Rising Bond Yields and Utility Sector Valuations in Canada

Market strategist Scott Barlow published analysis regarding Canadian growth trends, noting that U.S. and Canadian long-term bond yields have risen materially. The analysis found that utility valuations for TSX-listed stocks have fallen to 27 per cent of the broader market, while U.S. utilities trade at a 15 per cent discount. The impacts of higher bond yields on utility companies are described as modest regarding earnings per share.

The sector's valuations are consistent with historical relationships to macro factors like oil prices and bond yields. While operating company debt costs are recoverable through customer rates, the analysis suggests that a meaningful re-rating may require yields to moderate or other risk-off signals to emerge.