13.03.202615:00:17UTC+00Canada 10-Year Bond Yield Drops From July Highs

The yield on Canada’s 10-year government bond has slipped toward 3.48%, pulling back from its highest level since July as signs of a weakening domestic labor market and slowing industrial activity reshape expectations for monetary policy. The unemployment rate climbed to 6.7% in February following the loss of 83,900 jobs, pointing to a deeper contraction in the productive economy and lowering the probability of further policy tightening. Manufacturing sales fell 3% in January as several industrial subsectors struggled with softening demand. Although energy prices remain elevated at around $100 per barrel, markets are giving greater weight to evidence of economic slack and to the 0.6% decline in GDP recorded in late 2025. Together, these factors indicate a widening output gap that constrains policymakers’ capacity to sustain a restrictive stance, even amid ongoing global commodity volatility. Investors are now anticipating a more cautious central bank approach, as the deterioration in labor market conditions counterbalances the inflationary pressures stemming from supply chain disruptions.