The yield on Canada’s 10-year government bond has risen above 3.48%, reflecting persistent global inflationary pressures and a more hawkish shift in North American interest rate expectations. This move comes even as Canada’s headline inflation slowed more than expected to 1.8% in February and the unemployment rate climbed to 6.7% after the economy shed 83,900 jobs.
On March 18th, the Bank of Canada held its overnight rate at 2.25% and cautioned that uncertainty remains elevated. In parallel, stronger-than-expected US February PPI data and a more aggressive policy stance from the Federal Reserve pushed 10-year US Treasury yields to their highest levels since August 2025, against a backdrop of intensifying conflict in the Middle East.
Previously, markets had focused on the expanding output gap and easing food prices. However, the persistent risk of energy supply disruptions through the Strait of Hormuz continues to fuel volatility in benchmark yields. Canada’s 10-year bond is now moving in line with a broader global upswing in sovereign yields, as investors scale back expectations and now anticipate, at most, a single rate cut from major central banks this year.
