FX.co ★ Canada 10-Year Bond Yield Halts Rebounds

The yield on the 10-year Canadian government bond has gradually declined to around 3.1% after briefly recovering from its April lows. This downward trend is primarily driven by recent growth data that has dampened the earlier support provided by the Bank of Canada (BoC). September's Gross Domestic Product (GDP) saw a modest increase of 0.1% month-over-month, while the preliminary estimate for the third quarter was also 0.1%. However, it's notable that August's figures were revised to reveal a 0.3% month-over-month contraction, marking the most significant monthly decline since December 2022. These statistics reflect the impact of trade disruptions and elevated policy rates. Although the Bank of Canada reduced rates by 25 basis points to 2.25% and indicated this could signal the end of its easing cycle, the slowing economic activity and a cooling labor market have shifted investor attention back to the risks of reduced growth, leading to a decrease in the 10-year bond yield. Persistent inflation remains a concern, with the headline Consumer Price Index (CPI) around 2.4% year-over-year and the Bank’s Trimmed measure near 3.1%, posing challenges to policy decisions. In trade developments, Prime Minister Carney recently held discussions with China's Xi Jinping to renew economic ties and confirmed plans to double exports beyond the United States within the next ten years.