Canadian bond yield dips as weak jobs data lifts rate-cut hopes

Investing.com -- Canada’s benchmark 10-year government bond yield edged lower on Friday after a weaker-than-expected domestic jobs report, bucking a rise in U.S. Treasury yields following stronger-than-expected U.S. employment data.

The Canadian 10-year yield fell 2.2 basis points to 3.775% as of around 9:00 a.m. ET, while the comparable U.S. 10-year Treasury yield rose to 4.7862%.

Canada’s economy lost 41,700 jobs in August, Statistics Canada data showed, sharply reversing unusually strong hiring earlier in the summer. The unemployment rate nevertheless held at 6.4%, while economists had expected employment to increase by about 15,000.

The data reinforced expectations that the Bank of Canada can remain cautious on interest rates as the economy loses momentum. The August report also comes as investors assess the potential impact of new U.S. tariffs on Canadian industries and trade.

The move in Canadian bonds contrasted with the sharp reaction in U.S. markets, where Treasury yields climbed after U.S. employers added 162,000 jobs in August, well above expectations. The U.S. unemployment rate held at 4.1%, boosting expectations for a possible Federal Reserve rate hike later this month.

Canadian yields had entered Friday at elevated levels. The 10-year yield reached 3.747% on Wednesday, close to its highest level since April 2024, amid a broader global bond selloff driven by concerns over inflation, government borrowing and fiscal deficits.

For Canadian bonds, Friday’s move suggests the domestic labour-market signal is currently outweighing upward pressure coming from U.S. yields. The key question for investors is whether weakening employment and economic growth will eventually pull Canadian yields lower, even as elevated global yields and inflation risks keep longer-term borrowing costs under pressure.

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