Canadian Bond Yields Rise, But at a Slower Pace Than Global Peers

Canada's bond yields have been rising in tandem with global markets, but at a slower pace than its international peers. According to BMO Capital Markets, U.S. 10-year Treasury yields have increased by 53 basis points since the end of August, while comparable Government of Canada yields are up by only 20 basis points.

This gap between the two countries' bond yields now stands at 135 basis points, approaching the 151-basis-point extreme reached in January 2025. BMO chief economist Douglas Porter attributes this relative restraint to a weaker domestic growth outlook, milder inflation, and a less strained fiscal position compared to other major economies.

Porter also notes that expectations for a near-term Bank of Canada rate increase have eased following weaker U.S. employment data and lower oil prices. BMO now considers an October rate hike unlikely and continues to hold the view that the central bank will remain on the sidelines.