06.02.202616:35:31UTC+00Canada 10-Year Bond Yield Rises After Strong Labor Data

Yields on Canada's 10-year government bonds have climbed beyond 3.41%, reflecting a shift in market perceptions regarding the Bank of Canada's policy direction, catalyzed by robust domestic labor data. January's statistics revealed a drop in the unemployment rate to 6.5%, an ongoing year-on-year increase in full-time employment, and consistent wage growth hovering around 3.3%. These indicators suggest that labor market slack is not significantly expanding, thereby reducing the likelihood of imminent rate cuts. This trend was further accentuated by an uptick in global rates, with the U.S. 10-year yields trending towards the lower end of the 4% range. Adding to this upward trajectory of Canadian yields, the Bank of Canada's guidance has advised caution against premature policy easing and emphasized the uncertainties associated with distinguishing between structural and cyclical weaknesses. Such messaging has bolstered term premiums, maintaining upward pressure on longer-term Canadian yields.