FX.co ★ Canada 10-Year Bond Yield Eases Further

The yield on the Canadian 10-year government bond has recently hovered around 3.39%, continuing its decline from the one-year peak of 3.611% observed on July 15th. This movement aligns with a global bond market rally that gained traction due to disappointing US economic data and heightened trade-war fears, which pushed US Treasury yields to their lowest in three months. Earlier in July, strong core inflation near 3% and robust job growth had kept Canadian yields elevated. However, with June's headline inflation softening to 1.9% and the labor market showing signs of stabilization, expectations for further monetary tightening have diminished. On July 30th, the Bank of Canada maintained its policy rate at 2.75%, adopting a cautious stance while acknowledging that weaker growth and stable inflation might necessitate future rate cuts. As global recession concerns increase and the BoC's policy appears inclined toward easing, the bond markets have adjusted to a more dovish outlook, resulting in increased downward pressure on Canadian yields.