FX.co ★ Canada 10-Year Bond Yield Rise to 1-Week High

Canadian 10-year bond yields climbed to over 3.2%, marking a one-week peak. This upturn was fueled by domestic policy uncertainties and the pressures of increased supply, necessitating higher returns. A surge in new bond issuance is tied to Canada's larger-than-anticipated C$21.7 billion deficit over the initial nine months of the 2024/25 fiscal year, and this year's marketable debt program, which totals C$228 billion. This influx has expanded the supply and elevated term premiums. The Liberal Party's narrow minority victory, accompanied by its promises to boost spending on infrastructure and housing, has amplified worries regarding future deficits and the potential for heightened bond issuance. Concurrently, the Bank of Canada's choice to maintain its policy rate at 4.50%, despite ongoing core inflation issues, has fortified expectations for an extended period of monetary restraint. This scenario has led investors to seek higher yields across the yield curve. Additionally, the decline in oil prices has reduced federal resource revenues, thereby exacerbating fiscal concerns and reinforcing the move towards debt being repriced at higher yields.