Canada 10Y Bond Yield Hits 34-month High

Canada’s 10-year government bond yield eased to around 3.92% after touching a near three-year high of 4% on September 24th, as falling oil prices halted a sharp sell-off in global bonds. Lower oil prices tempered inflation concerns, pausing the broader bond-market selloff. Expectations that diplomatic efforts involving Iran and the US could make progress toward reopening the Strait of Hormuz drove oil lower. The latest decline in the 10-year yield therefore marks a partial reversal of the week’s bond-market selloff, although yields remain substantially above levels seen earlier in September. The BoC also faces inflation concerns as energy prices remain elevated. Meanwhile, Canadian retail sales likely increased 1.3% month over month in August, rebounding from a decline in July, according to estimates. This would mark the strongest gain since January. Stronger retail sales could signal resilient domestic demand, adding further upward pressure on yields.

Canada 10 Year Government Bond Yield increased to 3.99%, the highest since November 2023. Over the past 4 weeks, Canada 10Y Bond Yield gained 36.30 basis points, and in the last 12 months, it increased 75.40 basis points.

Canada’s 10-year government bond yield rose to around 3.95% in September, nearing a three-year high as energy-driven inflation concerns persisted. Oil prices rose after a five-week halt in the rally that followed the US-Iran war, amid uncertainty over diplomatic efforts to end the conflict and reopen the Strait of Hormuz. Strong US economic data also strengthened expectations that the Fed could deliver another rate hike this year. US Treasury yields soared to multi-decade highs, further pressuring Canadian bonds as domestic yields tend to track US rates. Fed projections showed that most policymakers expect another hike before the end of 2026. The Bank of Canada kept its key policy rate unchanged at 2.25% at its September meeting, as widely expected. However, it noted that inflation risks had increased, while new tariffs had made the growth outlook more uncertain. Governor Macklem said policymakers were prepared to raise rates if inflation remained elevated.