FX.co ★ Canada 10-Year Bond Yield Rises to 4-Month High

In May, Canadian 10-year bond yields surpassed 3.3%, reaching their highest level in four months. This rise occurred amidst investors assessing a mixed inflation report and experiencing upward pressure from US Treasury yields. Canada's inflation scenario has become more complex; while the headline Consumer Price Index (CPI) for April dropped to 1.7% year-over-year—the lowest it has been in seven months— the Bank of Canada's trimmed-mean core inflation measure unexpectedly rose to 3.1%, its highest point in over a year. This discrepancy has heightened expectations that the Bank of Canada might need to sustain its restrictive policy for an extended period, thus maintaining high real yields. Internationally, the US 10-year Treasury yield increased to a one-month peak after Moody's downgraded US sovereign credit to Aa1 on May 16, which reignited concerns about fiscal sustainability and led to a widespread increase in global sovereign yields.