Canada 10Y Bond Yield Hits 9-week Low

The Canadian 10-year government bond yield traded around 3.48%, remaining below July-2025 highs reached last month, as traders assessed the latest developments in the Middle East. US President Trump pledged more aggressive action against Iran but offered no concrete plans to reopen the Strait of Hormuz. Crude prices remain close to 2022 highs, fuelling inflation concerns and boosting the US dollar and Treasury yields. Last month, the Bank of Canada held its benchmark interest rate steady at 2.25%, noting it was too soon to assess the economic impact of the conflict but money markets are pricing in around 41bps of tightening this year.

The Canadian 10-year government bond yield stabilized near 3.47% on Wednesday as traders weighed tentative signs of a resolution to the Middle East conflict against increasingly hawkish expectations for the US Fed. This stabilization followed a significant rise in global yields during March amid fears of a prolonged war and surging energy costs. Market sentiment shifted as President Donald Trump indicated that Iran requested a ceasefire and suggested the conflict could conclude within weeks provided the Strait of Hormuz is reopened and secure. These developments helped pull oil prices back from recent highs and reduced the urgency for safe haven assets. However yields found support as fresh US data showed the private sector added 62K jobs in March and retail sales rose 0.6% suggesting the economy remains capable of absorbing shocks. Domestically the outlook remains cautious as Canadian manufacturing performance stagnated in March with the sector index falling to 50.0.

The Canadian 10-year government bond yield tumbled toward 3.45%, extending the retreat from recent peaks as heightening growth concerns and a flight to safety outweighed the inflationary pressure of surging energy prices. This downward correction mirrored the move in US Treasuries as investors sought refuge in sovereign debt amid the high magnitude of uncertainty regarding the impact of the five week conflict in the Persian Gulf. While a flash estimate showed February GDP expanded by 0.2% the broader outlook remains clouded by a rising unemployment rate and the potential for a global recession should the supply shock persist. Despite the spike in crude oil costs Federal Reserve Chair Powell noted that inflation expectations remain grounded which has limited the urgency for immediate policy hikes as central banks assess the fallout from the Iran war. The 10-year yield had gained significantly in March before this pullback as the market pivoted to prioritizing economic risks.