Canadian dollar strengthens, bond yields rise after BoC rate hike
TLT•The Canadian dollar rose 0.3% against the U.S. dollar and bond yields increased after the Bank of Canada raised its key rate by 25 basis points to 2.50%. Investors priced in a 45% chance of another hike in December and a second increase by January.
1. BoC raises rates
The Bank of Canada raised its key interest rate by 25 basis points to 2.50%, its first increase in more than three years, and said further increases might be needed to prevent higher energy costs from driving broader inflation.
2. Yields and currency rise
Canada’s two-year yield rose as much as 7.2 basis points to 3.441%, its highest level since August 2024, before pulling back to 3.406%. The 10-year yield gained 2.6 basis points to 3.857%, while the loonie rose 0.3% to 1.40 per U.S. dollar.
3. Other market factors
The Federal Reserve held rates steady. Oil futures settled 2.9% higher at $102.78 a barrel as fighting in Yemen renewed concerns about supply disruptions, while progress in U.S.-Canada talks to ease tariffs on Canadian steel and autos remained limited.
