FX.co ★ Canada 10-Year Bond Yield Rises After GDP

The yield on the Canadian 10-year government bond has climbed above 3.14%, interrupting the steep decline from its two-month high of 3.26% recorded on November 19th. This shift is attributed to a stronger-than-anticipated third-quarter GDP report, which has narrowed the chances for immediate policy easing. The GDP for Q3 experienced a 0.6% quarter-on-quarter growth and an annualized rate of 2.6%, following a contraction in the previous quarter. This improvement can be attributed to a decrease in the import bill by 2.2%, alongside a marginal 0.2% increase in exports. With the policy interest rate remaining steady at 2.25%, the Bank of Canada is anticipated to await more definitive signs of cooling inflation or a clearer shift in economic momentum before considering rate cuts. Additionally, the recently approved budget and the resulting larger fiscal deficit are projected to continue exerting upward pressure on yields due to an increased volume of federal issuance over time.