FX.co ★ Canada 10-Year Yield Hits Two-Year High

Canada’s 10-year government bond yield climbed to 3.8% in September, its highest level in more than two years, after the Bank of Canada (BoC) highlighted rising upside risks to inflation. At its September meeting, the BoC left its key policy rate unchanged at 2.25%, in line with expectations, but warned that inflation risks had increased and that newly imposed tariffs had raised uncertainty around the growth outlook. The Bank kept its options open on the future course of monetary policy, stating it would adjust its stance as necessary.

Oil prices remained elevated due to supply disruptions linked to the escalating conflict in the Middle East, further intensifying inflationary pressures and reinforcing expectations of a more hawkish stance from central banks. At the same time, financial markets are now pricing in nearly a 66% probability of a 25-basis-point rate hike by the Federal Reserve later this month, up sharply from about 40% just a week earlier.