FX.co ★ Canada 10-Year Bond Yield Hits 1-Month High

The yield on the 10-year Canadian government bond rose above 3.18%, marking a one-month high. This shift occurred as markets adjusted their outlook, moving from anticipating imminent rate cuts to expecting a prolonged pause in easing measures. The unexpected strength in October’s labor market, with the unemployment rate dropping to 6.9% from 7.1% and national employment increasing by approximately 66,600 jobs, along with accelerated wage growth around 4%, has influenced the outlook, suggesting that rates may need to remain elevated for a longer period. The Bank of Canada echoed this sentiment, emphasizing the necessity of maintaining a contractionary policy stance until inflation clearly returns to its target. This comes as the Bank of Canada's trimmed-mean core inflation gauge reached its highest level since February 2024, prompting a rise in anticipated real rates. Concurrently, a significantly larger fiscal deficit from Ottawa hinted at increased sovereign debt issuance and a greater supply premium on longer-term bonds. Meanwhile, in the United States, Treasury yields strengthened following advancements in government shutdown discussions and mixed economic data releases.