The yield on Canada’s 10‑year government bond hovered around 3.48%, as rising oil prices amid persistent tensions in the Middle East continued to exert upward pressure on inflation. Talks between the United States and Iran have stalled, and despite mixed indications about a possible resumption, the Strait of Hormuz remains effectively constrained, further amplifying price pressures.
Recent data reinforced this trend: Canada’s headline producer price index rose 2.4% month-on-month in March, well above the 1.6% consensus forecast, while raw materials prices jumped 12%, the steepest gain since 2020. Earlier releases also showed annual consumer inflation accelerating by 0.6 percentage points to 2.4%, consistent with Bank of Canada warnings that higher energy costs are pushing up inflation expectations.
The Bank of Canada is widely expected to leave interest rates unchanged at this week’s meeting, though markets remain divided over whether policymakers will hint at a possible rate hike or signal an extended pause for the remainder of the year.
