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

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typeContent_19130:::2025-05-22T17:20:42

Canadian 10-Year Yield Rises to 4-Month High

In May, the yield on the 10-year Canadian government bond climbed toward 3.4%, marking the highest level since mid-January. This increase was driven by expectations of fewer interest rate cuts from the Bank of Canada and escalating credit risk associated with US government debt. Yields on long-term Treasury notes rose following the US lower house's approval of a bill projected to widen the Federal budget deficit more than anticipated. This development heightened concerns over an unsustainable deficit, exerting pressure on Canadian fixed-income instruments. Within Canada, signs of rising underlying inflation prompted the market to reduce the forecasted rate cuts by the Bank of Canada for this year, as the closely-watched trimmed-mean core inflation reached its highest point in over a year. Consequently, investors adjusted their expectations for the BoC's upcoming June meeting, moving from anticipating a 25 basis point rate cut to predicting a hold on rates.

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