FX.co ★ Canada 10-Year Bond Yield Holds Above 3.25%

The yield on Canada's 10-year government bond remains above 3.25%, even after receding from its four-month peak of 3.4% on May 21st. This is supported by the steadfast stance of the Bank of Canada in the face of ongoing core inflation pressures. While April's headline Consumer Price Index (CPI) showed a decrease toward the 2% target, the trimmed-mean core inflation has persisted at higher levels. This has prompted the Bank of Canada to keep its policy rate steady at 2.75% and postpone any rate cuts, subsequently boosting yields for bonds with longer maturities. Additionally, the government's ongoing fiscal needs, funded through continuous debt issuance, have increased bond supply just as domestic pension funds are seeking higher returns elsewhere. Furthermore, ongoing uncertainties regarding U.S. tariffs on steel and aluminum, along with mixed signals from Canada's oil sector, have moderated growth expectations and led investors to demand a risk premium on Canadian long-term bonds.