Canada’s 10-year government bond fell to a 2-week low of 3.3%, tracking a general fall in government yields across the world as growing recession fears led investors flock to safety assets. Fed Chair Jerome Powell, while testifying before the Senate, accepted that steep rate increases could trigger a US recession and said the task of engineering a soft economic landing is “very challenging.” On the domestic front, rate-hike bets are supported by higher than expected inflation against the backdrop of strong labour market and retail sales data. Canada’s inflation runs at a 39-year high level of 7.7%, way above the Central bank’s target of 2%. Meanwhile, markets anticipate a 75 bps rate hike from the Bank of Canada next month, which would be the biggest in 24 years, after the Central bank raised the key interest rate by 50 bps in June. Further, policymakers pledged to run down the central bank’s balance sheet while hinting at further rate-hikes, should the inflation situation persist.
Historically, the Canada Government Bond 10Y reached an all time high of 12.44 in March of 1985. Canada Government Bond 10Y - data, forecasts, historical chart - was last updated on June of 2022.
The Canada Government Bond 10Y is expected to trade at 3.55 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 4.01 in 12 months time.