FX.co ★ Canada 10-Year Bond Yield Nears 2024 Highs

Canada’s 10-year government bond yield climbed to 3.70% in mid-May, its highest level in about two years, as rising oil prices rekindled worries about a potential inflation shock. Crude prices moved higher amid stalled efforts to secure an agreement to halt ship attacks and seizures around the Strait of Hormuz, amplifying broader stagflation concerns and strengthening expectations for higher interest rates. March inflation figures had already underscored the impact of elevated energy costs on Canadian consumer prices, keeping markets alert to renewed upside risks. Canada’s annual inflation rate rose to 2.4%, matching its highest reading in a year. Even so, the Bank of Canada indicated at its latest meeting that it does not view the risk of energy-driven inflation becoming entrenched as significant and therefore left interest rates unchanged.