Canada’s 10-year government bond yield eased to around 3.92% after briefly touching a near three-year high of 4% on September 24th, as a drop in oil prices interrupted the sharp global bond sell-off. Cheaper oil helped temper inflation worries, providing a pause in the broader move out of bonds. Expectations that diplomatic efforts involving Iran and the US could advance toward reopening the Strait of Hormuz pushed oil prices lower. The resulting decline in the 10-year yield represents a partial reversal of the week’s bond-market losses, though yields remain well above early-September levels. The Bank of Canada still faces inflation risks, however, with energy prices elevated.
On the data front, Canadian retail sales are estimated to have risen 1.3% month over month in August, rebounding from a decline in July and marking the strongest increase since January. Firmer retail activity would point to resilient domestic demand, which could add further upward pressure on yields.
