Canada 10-Year Bond Yield Rebounds Sharply

The yield on Canada’s 10-year government bond surged past 3.22%, tracking a global move into safer assets as a massive escalation in Middle East warfare reshaped market expectations. While domestic yields initially fell on news that the economy shrank by 0.6% in the final quarter of last year, the sudden 8% spike in oil prices following the closure of the Strait of Hormuz has revived fears of a fresh inflation wave. This global pressure mirrored a jump in US Treasury yields, as investors worried that rising energy costs would force central banks to keep interest rates higher for longer. Despite the local manufacturing PMI hitting a 13-month high of 51 in February, the bond market is now caught between a cooling domestic economy and the threat of global price shocks. While Canada’s trade status remains relatively secure compared to peers facing new US tariffs, the risk of a prolonged regional war has pushed yields off their recent three-month lows.

Canada’s 10-year government bond yield fell to a fresh three-month low of 3.16%, as an unexpected economic slump fueled expectations for a more accommodative monetary stance. While markets originally anticipated a flat reading, Statistics Canada reported that the economy shrank by 0.6% in the final quarter of 2025, marking the weakest annual performance in nearly a decade. This contraction was largely triggered by a massive $23.5 billion inventory drawdown and a sharp drop in exports. The resulting downward pressure on yields has been amplified by a global bond rally amid shifting trade policies. Although the US implemented a 10% global surcharge under Section 122, the exemptions for trade-compliant Canadian goods have helped stabilize the local debt market compared to other international peers. With inflation already slowing to 2.3%, the combination of negative growth and secured trade status has reinforced the Bank of Canada's decision to keep its policy rate at 2.25%.

Canada 10 Year Government Bond Yield decreased to 3.17%, the lowest since December 2025. Over the past 4 weeks, Canada 10Y Bond Yield lost 24.80 basis points, and in the last 12 months, it increased 21.05 basis points.