Canada 10-Year Bond Yield Hovers Near Monthly Highs

The yield on the Canadian 10-year government bond climbed above 3.48% hovering near monthly highs as markets recalibrated rate-cut expectations following tepid progress on core inflation.

Trimmed-Mean inflation has stubbornly hovered above 3% for the fourth consecutive month in July, suggesting the Bank of Canada may stand pat on rates rather than cutting soon.

Concurrently, investors have grown cautious amid projections of record-high federal debt issuance this fiscal year due to a delayed budget and rising spending commitments from the re-elected government, as the sheer volume of upcoming long-dated supply has heightened term premium and pushed bond yields higher.

At the same time, rising US Treasury yields have pushed Canadian yields higher as investors weighed minutes from the FOMC's last meeting, which showed that most policymakers agreed inflationary risks outweighed concerns about a softer labor market.