Canada 10-Year Yield Extends Three-Year High

Canada’s 10-year government bond yield rose above 4% in October, reaching a fresh three-year high as renewed selling in US Treasuries fueled a broader global bond selloff. The US 10-year benchmark yield climbed to its highest level since 2002, extending a months-long rise in sovereign borrowing costs. Higher oil prices have added to inflation concerns and reinforced expectations of further interest-rate hikes by central banks, keeping government bonds under pressure worldwide. In Canada, the advance estimate showed real GDP rose 0.2% in August, with gains in mining and quarrying and retail trade partly offset by a decline in oil and gas extraction. GDP was essentially unchanged in July, ending a three-month run of growth. The result was in line with expectations but highlighted a weaker start to the third quarter, reinforcing expectations for the Bank of Canada to hold rates. A US ban on various Canadian imports also took effect, further weighing on growth prospects.

Canada’s 10-year government bond yield rose to near 4% in late September, approaching a three-year high as the US Treasury selloff resumed. Global government bonds have come under pressure as Middle East-driven oil price gains fuel expectations that central banks, including the Fed, will raise interest rates further. In the US, strong economic activity, along with concerns over large fiscal deficits and rising government debt, is also weighing on the bond market. In contrast, Canada’s advance estimates showed real GDP increased 0.2% in August, with gains in mining and quarrying and retail trade partly offset by a decline in oil and gas extraction. GDP was essentially unchanged in July, ending a three-month run of growth. The result was in line with expectations but highlighted a weaker start to the third quarter, reinforcing expectations for the Bank of Canada to hold rates. The US ban on various Canadian goods imports also took effect, further weighing on growth prospects.

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.