Canada 10-Year Bond Yield Near 6-Month High

The yield on the Canadian 10-year government bond was above 3.87%, marking a near six-month high and tracking US Treasuries higher, as US inflation and labor data countered sluggish GDP growth, dampening expectations for Fed interest rate cuts.

Despite weaker-than-expected US economic growth, the core PCE price index surpassed estimates, alongside a robust labor market indicated by jobless claims at a two-month low, eased pressure for accommodative borrowing costs.

Meanwhile, stagnant consumer spending in Canada, as evidenced by no growth in Q1 retail sales, underscored economic deceleration.

Recent data also showed domestic annual inflation at 2.9% in March, below expectations, with core inflation measures monitored by the Canadian central bank declining more than anticipated, hinting at expectations for lower underlying inflation.

This scenario may prompt interest rate cuts, supporting Canadian government bonds and alleviating the sharper sell-off seen in US Treasuries.