Canada 10-Year Yield Nears Three-Year High
Canada’s 10-year government bond yield rose to around 3.95% in September, nearing a three-year high as energy-driven inflation concerns persisted. Oil prices rose after a five-week halt in the rally that followed the US-Iran war, amid uncertainty over diplomatic efforts to end the conflict and reopen the Strait of Hormuz. Strong US economic data also strengthened expectations that the Fed could deliver another rate hike this year. US Treasury yields soared to multi-decade highs, further pressuring Canadian bonds as domestic yields tend to track US rates. Fed projections showed that most policymakers expect another hike before the end of 2026. The Bank of Canada kept its key policy rate unchanged at 2.25% at its September meeting, as widely expected. However, it noted that inflation risks had increased, while new tariffs had made the growth outlook more uncertain. Governor Macklem said policymakers were prepared to raise rates if inflation remained elevated.
95% in September, nearing a three-year high as energy-driven inflation concerns persisted. Oil prices rose after a five-week halt in the rally that followed the US-Iran war, amid uncertainty over diplomatic efforts to end the conflict and reopen the Strait of Hormuz. Strong US economic data also strengthened expectations that the Fed could deliver another rate hike this year. US Treasury yields soared to multi-decade highs, further pressuring Canadian bonds as domestic yields tend to track US rates.
Fed projections showed that most policymakers expect another hike before the end of 2026. 25% at its September meeting, as widely expected. However, it noted that inflation risks had increased, while new tariffs had made the growth outlook more uncertain. Governor Macklem said policymakers were prepared to raise rates if inflation remained elevated.