Canadian Rates Track Us Moves
Canada’s employment report on Friday was expected to show only a modest rebound and could affect markets. Geopolitical developments were expected to carry more influence later in the week if no agreement was reached by Tuesday night’s deadline. A 5-year bond auction was also due and was expected to affect duration during the week. Positioning remained focused on being long Canada’s 2-year segment while monitoring Middle East developments and March Labour Force Survey data. The article stated it was produced with the help of an AI tool and reviewed by an editor. We are seeing Canadian rates open weaker this week, with yields across the curve up about 2 to 3 basis points. This is tracking the move in U.S. Treasuries following last Friday’s surprisingly strong American jobs report, which showed the creation of 290,000 new positions. The market is now pricing in less than a 50% chance of a June rate cut from the Federal Reserve.Key Data And Positioning
The major market moves in the coming weeks will likely be imported from the U.S. rather than driven by our own data. We saw a similar pattern throughout 2025, where Canadian bond yields were heavily influenced by the Fed’s policy decisions. The upcoming U.S. inflation data this week will therefore be the most significant catalyst for our market. Our own domestic picture is less impactful, with the March Labour Force Survey due this Friday. We are only expecting a modest rebound, with forecasts for job growth around the 15,000 to 20,000 mark. This level of growth is unlikely to shift the Bank of Canada’s current cautious stance. Geopolitical factors may hold more weight, especially with renewed tensions in the Middle East pushing Brent crude oil back above $95 a barrel. These energy price shocks create volatility that can override domestic economic signals. We will be watching these developments closely as they can complicate the inflation outlook. Given this backdrop, we are maintaining a bias to be long 2-year Canada bonds through derivatives like futures or swaps. This position benefits if short-term yields fall, which could happen if global risk aversion increases or the Bank of Canada signals a more dovish path. However, the upcoming 5-year government bond auction will put some temporary upward pressure on longer-term yields. Create your live VT Markets account and start trading now.
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