FX.co ★ Canada 10-Year Yield Extends Three-Year High

Canada’s 10-year government bond yield climbed above 4% in October, marking a new three-year high, as renewed selling in US Treasuries triggered a broader global bond selloff. The yield on the US 10-year benchmark rose to its highest level since 2002, extending a months-long increase in sovereign borrowing costs. Rising oil prices have intensified inflation concerns and strengthened expectations of further interest-rate hikes by central banks, keeping government bonds under sustained pressure worldwide.

In Canada, a preliminary estimate showed that real GDP grew by 0.2% in August, with increases in mining and quarrying and retail trade partly offset by a decline in oil and gas extraction. GDP was essentially flat in July, ending a three-month stretch of expansion. While the latest figures were broadly in line with expectations, they underscored a softer start to the third quarter and reinforced the view that the Bank of Canada is likely to keep interest rates on hold. In addition, a US ban on a range of Canadian imports took effect, further weighing on the country’s growth outlook.