Canada 10-year yield slips as global bond markets recover
By Aboki Forex —
Canada's benchmark 10-year government bond yield edged lower on Thursday as a recovery in global bond markets eased pressure on Canadian borrowing costs.
The yield was around 3.78% at 10:10 a.m. ET, down about 1.4 basis points from Wednesday's close of 3.798%. It traded between 3.739% and 3.799% during the session.
Market moves
Earlier in the session, the yield was reported at 3.748%, down 5 basis points. The U.S. 10-year Treasury yield was around 4.74%. The Canadian dollar strengthened to about C$1.379 per U.S. dollar.
The move follows a sharp selloff in global government bonds in recent sessions, driven by concerns about persistent inflation, higher energy prices, and rising government borrowing.
Bank of Canada stance
Canadian bonds had also come under pressure as investors reassessed the outlook for domestic interest rates. The Bank of Canada kept its policy rate unchanged at 2.25% on Wednesday but delivered a hawkish message. Governor Tiff Macklem said policymakers were prepared to raise rates if inflation remained too high.
Canada's annual inflation rate has risen to 3%. Higher oil prices linked to the conflict in the Middle East have increased upside risks to inflation. The central bank's stance had pushed Canadian yields higher, with markets pricing a potential rate increase by December.
What to watch
Thursday's decline in global yields provided some relief to longer-dated Canadian debt. Investors now focus on Friday's U.S. nonfarm payrolls report for clues about the Federal Reserve's next policy move.
A weaker labour-market reading could reinforce the recent pullback in U.S. yields and support Canadian bonds. A strong report could revive expectations of tighter U.S. monetary policy and put renewed upward pressure on yields.