The yield on Canada’s 10-year government bond eased to 3.54% from 3.57% on July 14th, pulling back from a near two-month high. The move reflected a decline in US Treasury yields, which offset support from the Bank of Canada’s relatively upbeat economic outlook.
US yields retreated after softer-than-expected June CPI and PPI data, which largely erased expectations of an interest rate hike at the Federal Reserve’s next meeting. However, Canadian yields did not fall as sharply, constrained by the Bank of Canada’s comparatively hawkish tone.
At its July meeting, the Bank of Canada left its policy rate unchanged, as widely anticipated, but emphasized that economic growth is expected to remain solid over the coming quarters. The central bank also revised its inflation forecast higher for this year, citing the impact of the war in the Middle East on energy prices.
