Canadian government bonds form a highly rated sovereign curve closely tied to US Treasuries and to oil, reflecting the Bank of Canada and Canada's commodity economy. The 2-year yield is the point most sensitive to central-bank policy, essentially the market's bet on where the policy rate is heading over the next couple of years.
Aon: Canadian DB pension funded ratio rises to 123.3% in Q3
Aon plc announced that the aggregate funded ratio for Canadian defined benefit pension plans in the S&P/TSX Composite Index rose to 123.3% at the end of the third quarter of 2026, up from 117.6% at the end of the prior quarter. The Aon Pension Risk Tracker, which has measured the aggregate funded position on an accounting basis for S&P/TSX Composite Index companies with defined benefit plans since 2013, reported that pension assets lost 1.5% over the quarter. The long-term Government of Canada bond yield increased 57 basis points from the previous quarter and credit spreads widened by 1 basis point, lifting the discount rate by 58 basis points to 5.22%. Nathan LaPierre, Partner, Wealth Solutions, Canada at Aon, said that despite modest weakness in equity markets, funded positions improved as higher discount rates reduced the value of pension liabilities, and that strong funded positions give sponsors flexibility to manage pension risk proactively amid continued uncertainty and market volatility.
AON · Capital · Positive Aon's Pension Risk Tracker shows Canadian DB funded ratio rising to 123.3%, highlighting its pension risk services amid improved funding positions.
CA-10Y.GB · Monetary · Positive Long-term Government of Canada bond yield rose 57bp to lift the discount rate to 5.22%, meaning the 10Y yield moved higher.
Canada August CPI rises 3.0% year-on-year, growth rate unchanged
Statistics Canada reported on the 14th that the August consumer price index rose 3.0% year-on-year, with the growth rate unchanged from July. On a month-on-month basis, it fell 0.1%. Persistently high crude oil prices affected gasoline prices, while the slowdown in food price growth was also limited. Gasoline prices rose 22.8% year-on-year, slowing from a 25.7% increase the previous month. Food prices rose 2.8%, falling below 3% for the first time in 14 months, as growth in dairy products slowed. Travel and tours rose 26.1%. The CPI median, which shows the median change rate of component items, was 2%, and the CPI trim, which excludes items with extreme price fluctuations, was 1.9%. The Bank of Canada has indicated it will not hesitate to raise interest rates multiple times if inflation remains elevated and affects core indicators, and after the CPI release, the Canadian dollar has been trading with a selling bias against the US dollar.
Bank of Canada Holds Rate at 2.25%, Tariffs Raise Inflation Concerns
The Bank of Canada held its key overnight rate at 2.25% on Tuesday, as expected, marking the seventh consecutive meeting without a change. In its statement, the central bank noted that new U.S. tariffs and Canada's retaliatory measures could push up business costs and gradually feed into consumer prices. While upside risks to inflation have increased, the bank expressed concern that tariffs add uncertainty to the economic growth outlook. With ongoing tensions in the Middle East, it reiterated its readiness to adjust monetary policy as needed.
CAPRIMERATE.MM · Monetary · Negative Bank of Canada holds rate at 2.25%, no change, but signals potential future hikes due to tariff-driven inflation, which could lead to higher rates.
USDCAD.FOREX · Monetary · Positive Tariffs and uncertainty may weaken CAD, but BoC hold and inflation concerns create mixed signals.
CA-10Y.GB · Monetary · Negative Holding rates steady but with hawkish tone on inflation may lead to higher yields, but current hold suggests no immediate change.
Bank of Canada Governor Says Upside Risks to Inflation Are Rising
Bank of Canada Governor Tiff Macklem said that upside risks to inflation are increasing. He noted the possibility of stronger price pressures and said monetary policy needs to be managed carefully. The remarks have strengthened expectations among market participants of further interest rate hikes.
US Jobs Improvement Would Keep Dollar Buying Alive, September Rate Hike Expectations
Among the major economic indicators scheduled for release from August 31 to September 4, the focus is on the US August employment report. If it shows an improvement in the labor market, dollar buying is expected to continue in light of tightening monetary policy. The US employment report is due out at 9:30 p.m. on the 4th, with nonfarm payrolls expected to rise by 55,000 month-over-month, the unemployment rate at 4.1%, and average hourly earnings up 0.3% month-over-month. Also, the Bank of Canada is set to announce its policy rate on the 2nd, expected to hold at 2.25%. The US ISM non-manufacturing index is due on the 3rd, expected at 54.3. Canada's employment report is also due on the 4th, with payrolls expected to rise by 17,500 and the unemployment rate at 6.4%.
Canada adds 75,100 jobs in July, far exceeding forecasts, unemployment rate improves to 6.4%
Statistics Canada reported that employment rose by 75,100 in July, far surpassing market expectations of a 16,500 increase. The unemployment rate improved to 6.4%, marking the third consecutive month of improvement and the lowest level in two years since July 2024. Average hourly wages for permanent employees rose 3.0% year-on-year, slowing from a 3.7% gain the previous month and posting the smallest increase since February 2022. The Bank of Canada held its policy rate at 2.25%, and financial markets expect no rate hikes this year.
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