FX.co ★ Canada 10-Year Yield Retreats After Jobs Data

Canada’s 10-year government bond yield edged down to 3.77% from the more than two-year high of 3.80% reached on September 3rd, following the release of labor market data. Employment fell by 41,700 in August, sharply undershooting expectations for a 15,000 increase and reversing much of July’s 75,100 gain. The weaker jobs report is likely to reinforce a more dovish bias at the Bank of Canada (BoC).

At its September meeting, the BoC left its key policy rate unchanged at 2.25%, in line with market expectations, but warned that inflation risks had risen and that newly imposed tariffs had increased uncertainty around the growth outlook. Even so, Governor Macklem emphasized that policymakers stand ready to raise interest rates if inflation remains persistently high.

In contrast, US labor market figures surprised to the upside, with nonfarm payrolls rising by 162,000—around three times the consensus forecast—strengthening market expectations for a Federal Reserve rate hike in September.