FX.co ★ Canada 10-Year Yield Retreats as Employment Declines

Canada’s 10-year government bond yield eased to around 3.9% after briefly topping 4% on October 1st, its highest level in three years. The pullback followed weaker-than-expected labour market data, which strengthened expectations that the Bank of Canada will keep interest rates on hold.

Total employment declined by 68,000, sharply missing forecasts for a 7,000 increase, while the unemployment rate inched up 0.1 percentage point to 6.5%, in line with projections. Other recent indicators also signalled a cooling economy. Real GDP is estimated to have grown by 0.2% in August, as gains in mining and quarrying and in retail trade only partly offset a contraction in oil and gas extraction. GDP was essentially flat in July, ending a three‑month run of expansion. Although August’s figure met expectations, it underscored a softer start to the third quarter.

At the same time, elevated oil prices continued to stoke inflation concerns and expectations of further interest rate increases by major central banks, keeping global bond markets under pressure. The yield on the US 10-year Treasury remained close to multi-decade highs.