Canada 10-Year Yield Tumbles Below 1% on Global Growth Concern

  • Benchmark yield lowest since February as sovereign bonds gain
  • Canada yields caught in ‘global vortex,’ BMO’s Gregory says

Canadian government bonds rose, with benchmark 10-year yields falling below 1 percent, as renewed concern about global economic growth pushed investors into the haven of sovereign debt.

The 10-year yield fell to the lowest since February as signs of slowing growth in Europe boosted bonds and halted a week-long rally in stocks worldwide. The 30-year bond yield fell to a record low. Almost $10 trillion of securities in the Bloomberg Global Developed Sovereign Bond Index yielding less than zero has driven demand for higher-yielding debt in Canada and the U.S.

Developed-market sovereign bonds have surged since the U.K. vote last month to leave the European Union fueled demand for safe assets, pushing yields on debt from Germany to Japan to record lows. Returns on Canadian bonds have trailed global peers this year as a rebound in oil prices and signs of domestic economic growth eased pressure on the Bank of Canada to cut interest rates.

"We’re caught in this global vortex” of falling yields, said Michael Gregory, deputy chief economist at BMO Capital Markets in Toronto. "There’s this tug-of-war between global forces, which are pulling yields down, and domestic forces applying upward pressures."

The benchmark 10-year note yield dropped six basis points, or 0.06 percentage point, to 0.99 percent as of 12:07 p.m. in Toronto, the lowest on an intraday basis since Feb. 11, according to Bloomberg Bond Trader data. 

The 30-year bond yield fell seven basis points to 1.60 percent, a record low.

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