Canadian Bond Yields Ease as Tame US Inflation Reduces Rate Hike Odds

The Canadian 10-year bond yield retreated from its two-year high after the release of tame U.S. inflation data, reducing the likelihood of an interest rate hike by the Federal Reserve next month.

The 10-year yield fell to 3.685%, down 2.3 basis points, after earlier matching a high not seen since May 2024 at 3.755% on Tuesday.

This decline follows a significant increase in the past month, with Canada's 10-year yield rising about 17 basis points, the most among G7 sovereign debt, as jobs, trade, and GDP data pointed to a recovery in the domestic economy after a slow start to the year.

According to Robert Both, senior Canadian macro strategist at TD Securities, 'We can look at the relative data performance over the past maybe six weeks. That helps Canada underperform the U.S. at the front-end of the curve.'