FX.co ★ Canada 10-Year Bond Yield Halts Upswing After BoC

The yield on Canada's 10-year government bond recently stood at approximately 3.43%, a slight decrease from its earlier climb to 3.47%—the highest since early September, observed on December 9th. This adjustment comes as markets absorb the latest policy decisions and forward guidance from the Bank of Canada. The Bank maintained its December interest rate at 2.25%, signaling that the current rate is "about right." Additionally, it downplayed recent unexpected economic upturns and pointed out volatility driven by fourth-quarter trade activities, leading to reduced market speculation about imminent tighter policy and lowering expectations for rate hikes. Concurrently, mixed economic data complicates a clear path for tightening, despite a surprising Q3 growth of 2.6% annualized, an unemployment rate easing to around 6.5%, and a CPI hovering near 2.2% alongside persistently high core measures. This economic landscape urges the Bank of Canada to adopt a cautious stance rather than an aggressively hawkish approach. Meanwhile, external markets have adjusted to anticipate a Federal Reserve easing cycle, resulting in lower US Treasury yields.