Canada's 10-year government bond yield held near 3.60% in late July, after the Federal Reserve left its benchmark interest rate unchanged. Although this outcome had been widely anticipated, three FOMC members dissented in favor of a 25-basis-point increase, leaving the door open to tighter US monetary policy as early as September.
Earlier in the month, the Bank of Canada kept its policy rate at 2.25% for a sixth consecutive meeting. The central bank noted that the economy was continuing to adjust to recent shocks and that inflationary pressures stemming from higher energy prices were easing. At the same time, policymakers cautioned that inflation expectations remained elevated and raised concerns about the durability of the economic recovery.
Against this backdrop, investors continued to evaluate the potential impact of President Trump's proposed tariffs on Canadian imports, as well as the risks posed by renewed tensions between the United States and Iran.