The Canadian 10-year government bond yield fell toward 5.1%, as declining US Treasury yields and rising concerns about economic growth outweighed the inflationary impact of surging oil prices. This move tracked the drop in the US 10-year note yield, with investors shifting into safe-haven assets amid escalating military preparations in the Middle East. At the same time, expectations for further central bank tightening have eased: markets now assign only about a 20% probability to another Federal Reserve rate hike this year, with a similar repricing taking place for the Bank of Canada. Although earlier comments from President Trump and the deployment of additional US troops had initially reinforced hawkish expectations, the resulting jump in energy prices to their highest levels since 2022 is now increasingly seen as a headwind to global consumer demand. Investors are now focused on January’s GDP release to gauge how persistently elevated energy prices are affecting the Canadian economy and how this might influence future Bank of Canada policy.