FX.co ★ Canada 10-Year Bond Yield Surges to July-2025 Highs

The Canadian 10-year government bond yield climbed toward 3.6% on Friday, reaching its highest level since July 2025. The move tracked a sharp rise in US Treasury yields, as persistent tensions in the Middle East outweighed the brief market relief following the postponement of a strike.

The increase in Canadian yields mirrored the advance in the US 10-year benchmark, which also revisited its July 2025 highs, driven by mounting pro-inflationary risks and concerns that the current diplomatic window could be used to prepare for further military escalation rather than negotiations.

On March 18, the Bank of Canada left its policy rate unchanged at 2.25%. However, the Governing Council cautioned that continued energy price volatility and the risk of a potential closure of the Strait of Hormuz are keeping upside risks to inflation elevated.

On the domestic front, the 2026–27 fiscal plan, which foresees C$502.8 billion in total spending, including C$48.4 billion allocated to national defense, has contributed to increased supply of long-term government debt, adding upward pressure on longer-dated yields.

Overall, the 10-year benchmark is moving in line with a broader global rise in sovereign yields, as investors now anticipate, at most, a single interest rate cut this year from major central banks.