Canada 10-Year Bond Yield Sees Wild Ride on Oil Prices and Fed Rate Hike

The Canada 10-year government bond yield has been on a rollercoaster ride since mid-September, fluctuating between 3.87% and 3.94%. The initial decline was attributed to lower oil prices, but the Federal Reserve's rate hike soon reversed the trend, pushing the yield up.

The Fed raised its target range for the federal funds rate by 25 bps to 3.75%-4%, which led to an increase in the Canada 10-year yield. This was further supported by updated Fed projections indicating that most policymakers expect another hike before the end of 2026.

Meanwhile, the Bank of Canada kept its key policy rate unchanged at 2.25% during its September meeting, as widely expected. However, Governor Macklem noted that inflation risks had increased and new tariffs made the growth outlook more uncertain.