FX.co ★ Canada 10-Year Bond Yield Rebounds

The yield on Canada's 10-year government bond has recovered to 3.22% following a sharp decrease from its four-month peak of 3.4% recorded on May 21st. This movement aligns with a rise in US Treasury yields, spurred by renewed trade uncertainties and increased risk aversion after lackluster economic data emerged. The recent ISM Manufacturing PMI report indicated a larger-than-expected contraction, marking its third consecutive decline. Notably, its import sub-index hit a 16-year low as companies scaled back operations in response to trade tariffs. Intensified trade tensions—highlighted by China accusing the US of breaching agreements and President Trump's announcement to double steel and aluminum tariffs to 50%—caused further market unease. Domestically, robust underlying inflation, as indicated by a trimmed-mean core rate reaching a one-year high, coupled with a second consecutive monthly increase in retail sales, has moderated expectations of potential rate cuts by the Bank of Canada. As a result, investors are now anticipating a rate hold in June, contrary to earlier predictions of a 25 basis point reduction.