FX.co ★ Canada 10-Year Bond Yield Rebounds Sharply

The yield on Canada’s 10-year government bond climbed above 3.22%, following a global shift into safer assets as a major escalation in Middle East conflict reshaped market expectations. Domestic yields initially declined after data showed the economy contracted by 0.6% in the final quarter of last year, but an abrupt 8% jump in oil prices after the closure of the Strait of Hormuz has reignited concerns about a new wave of inflation. This global pressure echoed a rise in US Treasury yields, as investors grew wary that higher energy costs could force central banks to keep interest rates elevated for longer. Even as Canada’s manufacturing PMI reached a 13-month high of 51 in February, the bond market is now trapped between signs of a cooling domestic economy and the risk of global price shocks. Although Canada’s trade position remains relatively resilient compared with peers facing new US tariffs, the prospect of a drawn-out regional conflict has lifted yields from their recent three-month lows.