11:36 AM EST, 11/04/2024 (MT Newswires) -- Canadian long provincial returns were modestly weaker in October, as a backup in Government of Canada (GoC) yields was partly offset by tighter spreads, said Bank of Montreal (BMO).

The 30-year GoC yield rose by 14 bps and, despite a 50bps rate cut by the Bank of Canada, most yields were higher in the month, wrote the bank in its Provincial Credit Watch note released Monday. Firm United States economic data and the approaching US election drove US Treasury yields higher.

Provincial spreads, however, continued to tighten, with the 30-year narrowing by 3.5 bps in October, stated BMO. Provinces continue to run well ahead of schedule on their FY24/25 borrowing programs.

Long provincial total returns are now running at a "hefty" 15% on a 12-month basis, or a few basis points ahead of Canadas. BMO recalled that long GoC yields peaked just over a year ago, while spreads have narrowed somewhat in that period.

Long provincial spreads were tighter across the board in October with a few notable events among the provinces, added the bank.

Ontario's mid-year fiscal update came with a notably improved underlying fiscal position and, despite more than C$3 billion in new spending, a narrower budget deficit.

On the political front, the British Columbia NDP secured another majority mandate, although in an extremely close vote that warranted recounts in some ridings. The NDP has settled at 47 seats versus 44 for the Conservative Party and two for the Greens.

Meantime, Saskatchewan delivered another majority for the Saskatchewan Party, while New Brunswick power swung to the Liberals.