Canada’s 10-year government bond yield stabilized near 3.94% in mid-September after briefly dipping to 3.87% amid weaker oil prices. Yields subsequently climbed following the Federal Reserve’s latest rate increase, which lifted the target range for the federal funds rate by 25 bps to 3.75%–4.00%. Updated projections from the Fed indicated that most policymakers anticipate one additional rate hike before the end of 2026.
At its September meeting, the Bank of Canada left its key policy rate unchanged at 2.25%, in line with expectations. However, it warned that inflation risks had risen and that newly imposed tariffs had heightened uncertainty around the growth outlook. Governor Macklem emphasized that policymakers stood ready to raise rates further if inflation remained elevated. On the other hand, a pause in the oil price rally—following reports of a possible recovery in Saudi Arabia’s key East–West pipeline—helped to temper the rise in global bond yields.