Investing.com — Canada’s 10-year government bond yield jumped to 3.904% on Thursday, up 5.6 basis points, or 1.46%, as a global bond selloff intensified amid surging oil prices and renewed concerns about persistent inflation.
The move extends a sharp rise in Canadian borrowing costs, with the benchmark yield having closed at 3.848% on Wednesday, according to market data.
The latest move comes as global bond markets face fresh pressure from an oil-price surge linked to the escalating Middle East conflict. Brent crude climbed above $100 a barrel, raising concerns that higher energy costs could keep inflation elevated and delay interest-rate cuts globally.
The rise in Canadian yields also comes against a backdrop of tighter global financial conditions. The Bank of Canada said last week that long-term bond yields had moved higher globally, including in Canada, while warning that persistent high oil prices posed upside risks to inflation.
The central bank held its overnight rate at 2.25% on Sept. 2, noting that Canadian inflation had been hovering around 3%, mainly because of higher gasoline prices. It also warned that prolonged energy-price increases could spill over into broader inflation.
Higher Canadian bond yields can weigh on equities by increasing borrowing costs and reducing the relative appeal of risk assets. The S&P/TSX Composite opened down 0.85% on Thursday, with rising oil prices and bond yields among the factors pressuring sentiment.
The Canadian 10-year yield is now trading well above the 3.50% median year-end forecast in the Bank of Canada’s latest Market Participants Survey, underscoring how sharply the bond market’s outlook has shifted amid the recent inflation and energy shocks.
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