The yield on Canada’s 10-year government bond has decreased to 2.95% as of Tuesday, October 1, pulling back from the monthly high of 3.02% observed on Stember 26. This decline is attributed to dovish expectations surrounding both the Bank of Canada and the Federal Reserve, which have exerted downward pressure on yields.
Recent estimates suggest that Canada’s GDP likely stagnated in August, with growth in oil and gas extraction and the public sector compensating for reductions in manufacturing, transportation, and warehousing. This rresents the third bout of stagnation within six months, leading to a revised annualized growth projection for the third quarter of just 1%, significantly below the Bank of Canada’s forecast of 2.8%. Consequently, market expectations for an upcoming half-percentage-point interest rate cut from the BoC have increased, as Governor Tiff Macklem indicated that further aggressive rate cuts may be necessary if economic conditions do not improve.
Looking ahead, analysts predict that the Canada 10-Year Government Bond Yield will decline to 2.87% by the close of this quarter, based on global macro models. Further projections suggest the yield could settle around 2.67% in twelve months.