Canadian Bond Yield Eases as Oil Rally Stalls

The yield on Canada's 10-year government bond fell to about 3.60% from an over one-month high of 3.66% on July 23rd as the oil rally paused, easing energy-driven inflation concerns. Meanwhile, Canada's annual inflation rate eased to 2.8% in June 2026 from 3.2% in May, slightly below forecasts of 2.9%. Gasoline prices increased at a slower pace, while the Bank of Canada's preferred core inflation measures fell to their lowest levels in more than five years, reinforcing the BoC's view that higher energy costs stemming from the Middle East oil supply crisis are not spreading broadly throughout the economy. The softer inflation data also reduced expectations of further Bank of Canada interest rate hikes this year.

Canada 10 Year Government Bond Yield increased to 3.60%, the highest since May 2026. Over the past 4 weeks, Canada 10Y Bond Yield gained 15.40 basis points, and in the last 12 months, it increased 3.00 basis points.

The yield on Canada's 10-year government bond rose above 3.57% in July, the highest in two months, as investors weighed rising US Treasury yields against soft Canadian inflation data. US bond yields increased as tensions between the US and Iran escalated over the weekend, sending oil prices higher before they pared most of their gains following comments from Iran's foreign ministry indicating that negotiations with the US could continue. Meanwhile, Canada's annual inflation rate eased to 2.8% in June 2026 from 3.2% in May, slightly below forecasts of 2.9%. Gasoline prices increased at a slower pace, while the Bank of Canada's preferred core inflation measures fell to their lowest levels in more than five years, reinforcing the BoC's view that the impact of higher energy costs stemming from the Middle East oil supply crisis is not spreading broadly throughout the economy. The softer inflation data reduced expectations of further Bank of Canada interest rate hikes this year.