Canada 10-Year Bond Yield Retreats From 2-Year High

Canada's 10-year government bond yield fell to 3.45% from the two-year high of 3.7% touched on May 19th, tracking similar moves in the US as the outlook of soaring inflation was tamed by a pullback in energy prices. The US and Iran signaled they were closer to agreeing on a deal to end the war and restore energy supply from the key region. Despite fresh strikes that dented optimism on a deal, the drop in energy costs aligned with the Bank of Canada's signal that it does not see high energy prices spreading to inflation in core sectors of the economy. Likewise, the latest inflation report indicated that the Bank of Canada’s preferred core inflation gauges slowed more than expected to their lowest levels in five years. In turn, the GDP is expected to have been flat in the first quarter, also supporting the case for lower rates.

Canada 10 Year Government Bond Yield decreased to 3.45%, the lowest since April 2026. Over the past 4 weeks, Canada 10Y Bond Yield gained 4.80 basis points, and in the last 12 months, it increased 18.45 basis points.

Canada’s 10-year government bond yield rose to 3.74% in May, the highest level in over two years amid the surge in US long-term yields, even as soft domestic inflation data reinforced expectations that the BoC will not hike rates. High energy prices and robust economic data in the US drove the yield on their 30-year bond to an 18-year high, spreading into North American bond markets. Meanwhile, domestic headline inflation rose to 2.8% in April due to rising gasoline costs linked to the Middle East conflict. Still, the Bank of Canada’s preferred core inflation gauges slowed more than expected to their lowest levels in five years, suggesting underlying price pressures outside energy have eased. The data aligned with recent signals from the central bank that energy-driven inflation may prove temporary and reduced concerns over additional rate hikes. Still, Governor Tiff Macklem has also warned that geopolitical tensions and trade uncertainty could still alter the policy outlook.