24.06.202614:43:49UTC+00Canada 10-Year Yield Eases on Soft Core Inflation

Canada’s 10-year government bond yield fell below 3.40% in late June, its lowest level in more than three months, as subdued underlying inflation reinforced expectations that the Bank of Canada will keep rates on hold for the rest of the year. Core inflation measures monitored by the Bank of Canada stayed close to the 2% target in May, even as energy prices surged. This outcome supported the BoC’s earlier assessment that the conflict in Iran would have only temporary effects on headline inflation. At its most recent meeting, the Bank of Canada left its key interest rate unchanged at 2.25% and indicated that risks to inflation and employment remain broadly balanced against a backdrop of economic uncertainty. By contrast, the US Federal Reserve struck a more hawkish tone at its latest meeting, projecting rate increases by December. That shift led investors to scale back expectations for monetary easing, thereby limiting the decline in North American bond yields.