The yield on Canada's 10-year government bond eased to around 3.60%, retreating from a more than one-month high of 3.66% reached on July 23rd, as the recent rally in oil prices paused and tempered energy-driven inflation concerns. At the same time, Canada's annual inflation rate slowed to 2.8% in June 2026 from 3.2% in May, coming in just below market expectations of 2.9%.
Gasoline prices rose at a more moderate pace, and the Bank of Canada's preferred core inflation measures declined to their lowest levels in over five years. This reinforced the BoC's assessment that higher energy costs tied to the Middle East oil supply crisis are not feeding through broadly to the rest of the economy. The softer inflation readings also dampened expectations of additional Bank of Canada interest rate hikes later this year.
