Canada’s 10-year government bond yield rose on Tuesday, 8 September, as oil prices moved towards $100 a barrel and investors grew more concerned that higher energy costs could keep inflation elevated.
The benchmark yield reached 3.806 per cent by around 11.15am Eastern Time, up 2.7 basis points from the previous trading session. It had closed at 3.77 per cent on Friday, according to Bank of Canada data.
The move followed a sharp rise in Brent crude, which climbed to $99.46 a barrel, its highest level since 24 July. US crude also reached its strongest price since June as attacks by Iran-backed Houthi militants on Saudi energy facilities intensified fears of further supply disruption.
Higher oil prices can feed through into fuel, transport and production costs, complicating the outlook for consumer prices. The Bank of Canada has warned that prolonged energy-market disruption could push inflation higher and make price pressures more persistent.
Those concerns have led investors to scale back expectations for rapid interest-rate reductions by central banks. Government bond yields have risen internationally as markets assess the possibility that rates may need to remain higher for longer if inflation proves resistant to easing.
The Canadian market was also being influenced by movements in US Treasury yields. Investors are awaiting US inflation figures later this week for further indications of the Federal Reserve’s interest-rate path, with any renewed rise in American borrowing costs likely to add pressure to Canadian bonds.
