Canada’s 10-year government bond yield fell toward 3.23%, the lowest level in eleven weeks, as easing inflation and softer global conditions reduced long-term borrowing costs. Headline CPI slowed to 2.3% in January, while the Bank of Canada’s trimmed mean measure declined to 2.4%, adding to evidence that underlying price pressures are moderating and lowering the likelihood of further rate hikes.
With the policy rate steady at 2.25% and officials indicating that current settings are broadly appropriate, markets have flattened the expected interest-rate path, compressing the term premium embedded in 10-year yields. At the same time, renewed expectations of increased oil supply from April have weighed on energy price forecasts, dampening both inflation and terms-of-trade dynamics.
In parallel, US Treasury yields hovered near their early-December lows after similarly soft inflation data bolstered expectations of a more dovish Federal Reserve, adding further downward pressure on North American yields.
