Canadian Bond Yield Falls as Weak Jobs Data Boosts Rate-Cut Hopes

Canada's benchmark 10-year government bond yield fell on Friday after a weaker-than-expected domestic jobs report. The Canadian economy lost 41,700 jobs in August, reversing unusually strong hiring earlier in the summer.

The unemployment rate remained steady at 6.4%, but this was not what economists had expected, they forecasted an increase of about 15,000 jobs. This data reinforced expectations that the Bank of Canada can remain cautious on interest rates as the economy loses momentum.

Canada's 10-year yield fell by 2.2 basis points to 3.775% as of around 9:00 a.m. ET, while US Treasury yields climbed after stronger-than-expected US employment data. The contrast between the two markets highlights the domestic labour-market signal currently outweighing upward pressure coming from US yields.

Investors are now assessing whether weakening employment and economic growth will eventually pull Canadian yields lower, despite elevated global yields and inflation risks keeping longer-term borrowing costs under pressure.